Markets
The Dow Industrials suffered one of its biggest declines of the year on Thursday after a Citigroup downgrade reminded Wall Street that the crisis plaguing the credit crisis markets is lingering. The DJIA closed 362 points lower at 13567.9, marking its biggest loss since Oct 19 and the fourth biggest decline of the year. The S&P500 closed 40.95 points lower at 1508.45 and the Nasdaq fell 64.29 points to close at 2794.83.
Citigroup tumbled after a CIBC World Markets analyst lowered her rating of the company's stock and warned that Citigroup may have to cut its dividend in order to raise $30bn in capital. Citigroup declined to comment on the matter. The stock fell to its lowest level in 4 1/2 years, fuelling fears that other major financial players were harder hit by the summer's subprime crisis than originally anticipated.
Adding to the negative sentiment was Credit Suisse, which reported a 31 percent drop in profits, hurt by the US housing market and weakened demand for buyout loans.
Also pressuring stocks were disappointing results from Exxon Mobil, which reported a bigger than expected drop in quarterly earnings. Its shares fell 4 percent.
In related news, oil prices eased after hitting a new record high of $96.24 a barrel earlier in the day. Light sweet crude for December settled 42 cents lower at $93.07 a barrel in afternoon trade on NYMEX.
In economic news, the government reported that personal income and spending by individuals rose less than expected in September, while personal income rose in line with expectations. The report also included a key inflation measure known as the core PCE deflator, which measures prices paid by consumers for items other than food and energy. It showed a 1.8 percent increase, which is within the Fed's comfort level.
Manufacturing in the US grew less than expected during the month of October, the Institute for Supply Management reported. The report suggests that woes in the housing market could be spreading to the broader economy. And initial jobs claims came in at 327,000, a bit less than forecasts and the previous week's reading.
The biggest economic reading for the week is expected today. The monthly employment report for October is expected before the opening bell.
In corporate news, Sprint Nextel reported a steep drop in profits Thursday, hurt by its wireless business.
Ford Motor was the first to report October sales, reporting a 9.5 percent decline. Sales at General Motors improved during the month, outpacing gains in rival Toyota Motor.
Shares of footwear maker Crocs tumbled 36 percent after it forecast that its 2007 sales would miss Wall Street expectations.
Treasury prices gained, lowering the yield on the 10 year note to 4.35 percent from 4.47 percent.
The dollar, which hit yet another record against the euro Wednesday after the Fed rate cut, recovered slightly on the European currency but was lower versus the yen.
Gold prices fell $1.60 to $793.70 an ounce.
Japanese stocks posted a one week closing low today, snapping a two day winning streak as bank shares such as Mitsubishi UFJ Financial Group tumbled after broker downgrades on US banking giant Citigroup sparked fears of a further fallout from the credit crisis. Exporters such as Canon Inc reversed course after investors picked them up the previous session on optimism about US consumer spending. The Nikkei closed 352.92 points lower to close at 16517.48, the lowest close since Oct 26.
UK stocks closed 135.5 points lower on Thursday after banking stocks nosedived on renewed fears over the credit crunch. The FTSE mirrored falls in the US, with the DJIA shedding more than 200 points in morning trading as a downgrade for Citigroup sparked fears of a dividend cut. Inflation concerns on soaring oil prices and continuing weakness in the dollar added to investor nervousness. Meanwhile, traders also digested news that American consumers battered by a steep downturn in housing and a severe credit squeeze, slowed spending growth in September to the weakest performance in three months.
Northern Rock took the brunt of the falls, down 7 percent, and Barclays followed with a 5 percent drop. Alliance and Leicester and RBS also suffered, falling 38.5p and 17.75p respectively.
Smith and Nephew fell 32p after third quarter results left investors disappointed.
On the upside, Unilever rose 4 percent after it said it had been successful in passing on higher commodity costs.
Economics
US Non farm payrolls (Oct) 12.30 gmt
October non farm payrolls are expected to rise 80,000. State by state employment data for September rose by 335,000, suggesting on the margin than the reported +110,000 rise in payrolls could be revised lower. With housing starts and building permits falling to new cycle lows, cutbacks in construction employment (HSBC est -20,000) could accelerate. A 10,000 drop in financial sector employment is also expected. Initial jobless claims rose to 337,000 in mid October, while the four week moving average was 316,500. The unemployment rate is expected to rise from 4.7 percent to 4.8 percent, assuming a slight rise in the labour force participation rate from last months 66 percent. Average hourly earnings rose 0.4 percent last month, reflecting some upward pressure on wages. This month, a rise of 0.3 percent is expected.
US Factory orders (Sept) 14.00 gmt
We know that Durable goods orders fell 1.7 percent depressed by a 39 percent drop in defence related orders. Non durable orders are seen rising 0.7 percent, which should translate into a 0.6 percent decline for total factory orders.
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