Another wicked October takes its toll on investor confidence
Filed under: Company News, Economy, Earnings, CIT Group, Apple, Citigroup
Slipping consumer confidence sent U.S. stocks tumbling Friday, nearly ending a six-month-long sprint that saw major indexes climb steadily and dramatically in the face of recession. The drop, on the last trading day of a wildly volatile October, capped a month of stock-price swings that whipsawed investors as the markets raced between wins and losses in response to positive then negative economic news.Friday's sell-off was spurred by a disappointing Commerce Department report showing a 0.5 percent drop in consumer spending last month. The bad news was further bolstered by a University of Michigan survey that showed Americans were less optimistic about the economy in October than in the previous month. Stocks reacted dramatically, erasing all gains made Thursday, when markets rallied in response to a strong third-quarter GDP report.
October is typically a dreaded month on Wall Street, with specters of a succession of "Black days," the first four appearing in 1929, marking the beginning of the Great Depression, and a second Black Monday in 1987, that saw the Dow Jones industrial average ($INDU) lose nearly 23 percent in value on Oct. 19 that year.
The financial crisis that became full-blown after Lehman Bros. collapsed in September last year led to another nasty October in 2008. Nothing nearly so traumatic has happened this year, but the volatile swings in stock values have shaken investor confidence, leaving many to question whether the gains made since the lows of March are rooted in strong fundamentals.
The Dow industrials, for example, had no fewer than 10 days this month of triple-digit gains or losses. At the close today, the benchmark index was down nearly 250 points to 9,712, well below the much hallowed 10,000 level it had managed to recapture earlier in the month -- to much acclaim.
How Real Are Recent Gains?
Analysts were torn over whether Friday's pullback was a reaction to overinflated stocks values or rising concern that U.S. consumers, who account for the lion's share of the nation's economic activity, are yet ready to begin spending again. After the S&P 500 index ($INX) gained more than 18 percent since April, Steven Ricchiuto, chief economist at Mizuho Securities USA, told the New York Times that investors were dubious whether such gains were real.
"The question is whether that is a real snapback, or temporary," said Ricchiuto. "Today is a day of real consolidation to see where the market strengths and weaknesses are."
Within individual stocks, big losers Friday included CIT Group Inc. (CIT), which fell more than 20 percent as fears swirled about looming bankruptcy. Billionaire investor Carl Icahn stepped in to support a prepackaged bankruptcy plan, supplying a $1 billion credit line to provide additional liquidity for its restructuring, the company said in a statement.
Shares of Citigroup Inc. (C) fell nearly 6 percent on comments by analyst Michael Mayo of CLSA on cable-news network CNBC that the bank might have to write down some $10 billion in deferred taxes in the fourth quarter.
Citigroup took exception to Mayo's estimate, CNBC reported. "We have no idea how any analysts have gotten to this estimate," the cable network quoted Citigroup spokesman Stephen Cohen saying. He added the bank wouldn't comment further.
Spooked
Apple Inc. (AAPL) fell nearly 4 percent as Wall Street questioned whether the iconic computer maker didn't misstep in beginning to sell its popular iPhone in China by overpricing it. PC World reported that iPhone sales got off to a slow start Friday night in Beijing.
This October may have another been spooky one for investors, but November frequently brings calmer markets. Wall Street can only hope that by Thanksgiving there will be more feast than famine.
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Reader Comments (Page 1 of 5)
10-30-2009 @ 5:21PM
Robert said...
Obama's economic plan is working as planned. He's heading us to financial ruin so he can transform us into a communist state. Good work liberals!!!
Reply
10-30-2009 @ 5:35PM
song17dog said...
WHY BLAIME IT ALL ON OBAMA. G.W. BAILED OUT THE FIRST BANK BACK IN AUG 2008.
WE NEED TO LEARN TO PULL TOGETHER NOT TEAR IT ALL DOWN. THOUGH IF I HAD MY WAY A NEW TEA PARTY WOULD NOT BE AMISS.
10-30-2009 @ 7:41PM
vaughnvdg said...
Not OBAMA'S fault my friend. The economy is stille reeling as a result of the DEBT BASED PROSPERITY YEARS OF DUMBYA BUSH. Check out the FORECLOSURES and think about who was PRESIDENT when these loans were ORIGINATED to people who COULD NOT AFFORD THEM in the first place and also check out how many ATM MACHINE style HOME EQUITY LOANS were taken out against these properties that have DEPRECIATED IN VALUE and those LOANS carry INTEREST The NUMBERS don't lie my friend.
10-31-2009 @ 4:16PM
george said...
Where were you when in 2004 banks were further deregulated and haliburton was getting no bid contracts and the debt more than doubled. This mess was given to him, including the banking debt and service of national debt. Was it not GW who started the bailout?
11-01-2009 @ 1:22AM
TONY said...
ROBERT: I DO AGREE WITH YOU 100%; IN MY AREA (WEST NEW YORK, N. J. 07093, THE TAXES WERE UP 50% IN ONE SHUT THIS YEAR, (WE HAVE THE HOPE WITH A NEW MAYOR) FOR THE OFFICE OF THIS SMALL TOWN OF WORKING CLASS AMERICANS THAT AFTER WORKING LIKE SLAVES ALL THEIR LIFES, TODAY ARE LOOSING THEIR PROPERTIES BECAUSE OF THIS, WHILE THE MAYOR OF WEST NEW YORK, N. J. 07093 AND THE COMMISSIONERS ARE GETTING THE BIG FAT CHECKS EVERY MONTH AND THEY DO NOT EVEN LIVE IN THIS TOWN. THIS IS PURE AND SIMPLE THE STYLE OF COMMUNISM OR TOTALITARISM OF POWER OF THE BLOOD SHUCKERS.
Tony
11-01-2009 @ 10:03PM
RICH said...
ITS PUMP AND DUMP TIME THEY NEED THOSE HUGE BONUSES
10-30-2009 @ 9:58PM
song17dog said...
WHAT DO THE MORONS EXPECT WITH BETTER THAN 16 MILLION OF US UNEMPLOYED. YOU WOULD THINK THE GREAT MINDS WOULD REALIZE WE ARE IN A DEPRESSION NOT A RECESSION. JUST COMPARE THE NUMBER OF PEOPLE THROWN OUT OF WORK BACK ON BLACK FRIDAY AND COMPARE IT WITH THE 16 MILLION OUT OF THE TOTAL HERE IN THE U.S. TODAY. YOU WILL NOTE ONLY THE RICH AND THE BANKS GET BAILED OUT. WHO HELPS THE SMALL BUSINESS MAN WHEN HE IS WIPED OUT?
Reply
10-31-2009 @ 5:15PM
jansimply said...
Regardless whether you are a small business or a large one, it would still have to be paid back. Now is the time to go by that house you couldn't afford before. They have dropped enormously. Don't blame the man or woman who worked for many years to get educated and paid the price for it. You don't get something for nothing. If you want more then, get yourself educated to have that better paying job. There are no more free credit cards for all of you who abused them. If you can't afford something then don't go out and get in debt for it. You know when you go buy something whether you really can afford it or not. If you are in the shape you are in whether it good or bad, that is your problem, not everyone elses. We didn't sign up to take care of you and ourselves to boot. It is everyone's on place to take care of their own. Maybe this will teach all of those who went and spent money they didn't have by using those credit cards, buying those expensive houses, and cars a lesson. We will be bailing out all those who bought cars they couldn't afford in that "Cash for Clunkers" next. Is it our fault because some ran out and bought an expensive car next. That was no freebie for the taxpayers who will be forced to pay for them even though they didn't fall into that Obama trap.
10-30-2009 @ 6:12PM
DAVO said...
WARNING FAKE ECONOMY AHEAD
Reply
10-30-2009 @ 7:46PM
vaughnvdg said...
It won't be as FAKE as the DEBT BASED ECONOMY that BUSH had in place to SELL AMERICA DOWN THE RIVER.
10-31-2009 @ 11:03PM
Mel said...
vaughnvdg, I have seen a few posts about this economy being GWs. How he spent so much. Well, I have news for you, Obama has already increased the national debt by more than ALL of the prior presidents COMBINED. Did Bush do some stupid stuff? Absolutely. He was a RINO (Republican In Name Only). His biggest mistake was that he tried to reconcile with the idiot liberals and fell into their piss poor habits. Now Obama is in and he owns what he is doing. He is thrashing about because he is completely CLUELESS as to how to fix the problem. In typical liberal fashion, he hates what America is, not what it has become, but what America has always been. He believes that the USSR had it right and wants to re-make the USA in it's image. All you have to do is look at who he has surrounded himself with, thieves, cheats, terrorists, racists and communists. Before you come onto a blog and start posting your stupid drivel you really should become educated.
11-01-2009 @ 2:12PM
Hello said...
News Flash vaugh, both parties have sold us down the river.
10-30-2009 @ 6:52PM
tom said...
This market is long term heading back up.....most missed the big move....watch Tuesday move past 2009 highs.
Last chance to get on coard for an even bigger December move.
TFR
Reply
10-30-2009 @ 10:05PM
song17dog said...
PRAY IT DOES NOT SURPASS THE HIGH SET THIS YEAR. IF IT DOES THE FED WILL HAVE NO CHOICE BUT TO RAISE FEDERAL INTEREST RATES AND THAT WILL BE THE END OF THE BALL GAME.ie COLLAPSE OF THE MARKET. WATCH AND SEE
10-31-2009 @ 3:46PM
dom said...
must work in stocks tryn to phoney up, reailty partys over put your money in a savings bank an pay cash for all you need
11-01-2009 @ 12:57AM
thomas said...
tom you will have better luck playing big mac monopoly, until they get rid of the kenyan born president obama, i will watch all you experts go down the tube. correction election 2010-2012
10-30-2009 @ 9:09PM
Dan said...
Hey Robert,
And just which one of our 50 States do you think Obama will turn into a communist state?
Reply
10-31-2009 @ 3:07PM
Judi said...
ALL OF THEM IF PEOPLE ARE STUPID ENOUGH TO LET THEM PASS GOVERNMENT, SOCIALIST, CZAR CONTROL, LIMITED, RATIONED HEALTH CARE.
10-30-2009 @ 10:55PM
PAT KENMIR said...
All that stimulus, 750 BILLIONwent to banks so they could buy stock in the market to over-inflate their stock. Watch what happens when they lose it and ask the government for more. I bought in, in April, with $ 60,000 and just got out last week with $ 272,000. I'm just one of the lucky ones. Watch November..........., you an't seen nothing yet!!
Reply
10-30-2009 @ 11:05PM
David said...
Business and the public have little faith and trust in Washington. The proposed health care bill, if passed, will make things even worse. More taxes for business! Cap & Trade bill worries also contributing to the jittery business community. Washington conscentrating on only health care.
Congress does not indicate any interest in what citizens want and only follow their agenda. It is not a good business climate.
Reply