Weak corporate revenues, US data undercut stocks
Sunday, 18 July 2010
NEW YORK, July 17 (Reuters): Global share prices slid Friday after disappointing revenue reports from bellwether US corporations dovetailed with subdued US inflation and slumping consumer confidence data, driving up the price of Treasuries as investors sought safety.
The combination of reports undermined the fragile confidence in the global economy. On Wall Street, the three major indexes all fell more than 2.5 per cent.
Crude oil prices fell for a third straight day, and the dollar fell to a seven-month low against the yen, a traditional safe-haven investment. The US Labour Department reported consumer prices fell for a third straight month in June due to lower energy costs. A private survey showed US consumer confidence dropped to an 11-month low in July.
The fall in consumer prices comes one day after the government reported a decline in wholesale prices. Falling prices raise worries of a deflationary spiral in which consumers and businesses hold off on spending because of expectations of further price declines.
"Today's US reports provided an unpleasant close to a dismal week of data," said Mike Englund, chief economist at Action Economics in Boulder, Colorado. "The mix leaves an unwelcome lull in activity in the second quarter that has apparently extended into the first month of the third quarter."
General Electric Co, the largest US conglomerate, and top US financial groups Bank of America Corp and Citigroup Inc all reported declines in quarterly revenues from the prior year.
The revenues, which investors viewed as key to providing insight into future performance, offset the good news of rising profits. "The next step for earnings has to be top line or revenues, and revenues slowed down along with the consumer and the economy in the second quarter," said Gail Dudack, chief investment strategist at Dudack Research Group in New York.
At the close, the Dow Jones industrial average fell 261.41 points, or 2.52 per cent, at 10,097.90. The Standard & Poor's 500 Index lost 31.60 points, or 2.88 per cent, at 1,064.88. The Nasdaq Composite Index dropped 70.03 points, or 3.11 per cent, at 2,179.05.
The combination of reports undermined the fragile confidence in the global economy. On Wall Street, the three major indexes all fell more than 2.5 per cent.
Crude oil prices fell for a third straight day, and the dollar fell to a seven-month low against the yen, a traditional safe-haven investment. The US Labour Department reported consumer prices fell for a third straight month in June due to lower energy costs. A private survey showed US consumer confidence dropped to an 11-month low in July.
The fall in consumer prices comes one day after the government reported a decline in wholesale prices. Falling prices raise worries of a deflationary spiral in which consumers and businesses hold off on spending because of expectations of further price declines.
"Today's US reports provided an unpleasant close to a dismal week of data," said Mike Englund, chief economist at Action Economics in Boulder, Colorado. "The mix leaves an unwelcome lull in activity in the second quarter that has apparently extended into the first month of the third quarter."
General Electric Co, the largest US conglomerate, and top US financial groups Bank of America Corp and Citigroup Inc all reported declines in quarterly revenues from the prior year.
The revenues, which investors viewed as key to providing insight into future performance, offset the good news of rising profits. "The next step for earnings has to be top line or revenues, and revenues slowed down along with the consumer and the economy in the second quarter," said Gail Dudack, chief investment strategist at Dudack Research Group in New York.
At the close, the Dow Jones industrial average fell 261.41 points, or 2.52 per cent, at 10,097.90. The Standard & Poor's 500 Index lost 31.60 points, or 2.88 per cent, at 1,064.88. The Nasdaq Composite Index dropped 70.03 points, or 3.11 per cent, at 2,179.05.