Bad News Batters Stocks
Kurt Brouwer December 27th, 2007
Bad news struck stocks today. News of the terror bombing that took former Pakistani prime minister Benazir Bhutto’s life shook the stock market and turned what was a mild up day into a rout. The Wall Street Journal detailed the day [emphasis added below]:
Bad News Shakes Stocks (Wall Street Journal, December 27, 2007, Carolyn Cui)
‘Recently cheery holiday trading came to an end on Thursday, as stocks were knocked down by weak economic readings, predictions of more write-downs at financial firms and unsettling news of the death of Pakistani opposition leader Benazir Bhutto.
Major indexes opened lower, and selling intensified through the day on various pieces of bad news. The Dow Jones Industrial Average, which had been up four straight days, tumbled 192.08 to close at 13359.61, its lowest level of the day. The S&P 500 lost 21.39 to 1476.27, and the Nasdaq Composite Index declined 47.62, or 1.75%, to 2676.79, ending a six-session winning streak.
Before the opening bell, stock futures turned lower after reports that Ms. Bhutto had died from injuries sustained in an apparent suicide attack. “It certainly set a negative tone,” said Mickey Levy, chief economist at Bank of America.
“Regional destabilization will drive oil prices up, which will further weigh on the Federal Reserve’s ability to cut rates,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald, explaining the incident’s impact on the stock market.
The news caused some investors to flee to safe havens, pushing gold prices higher and Treasury-bond yields lower. Oil futures gained 65 cents to $96.62 a barrel, due in part to a report that U.S. crude-oil inventories fell more than expected last week.
Meanwhile, the latest U.S. economic indicators hinted at trouble. November orders for durable goods edged up 0.1%, well below Wall Street expectations; jobless claims rose by 1,000 in the week ended Dec. 22, the latest sign of slow deterioration in the labor market. The Conference Board said its consumer confidence index improvement modestly in December, but consumer attitudes about the job market deteriorated.
“We are seeing a very mixed set of signals” on the economy, said Walter Gerasimowicz, CEO of Meditron Asset Management, “Maybe we are positioning ourselves, with the Fed continuing providing liquidity and lowering interest rates, for a soft landing.”…’
For more on the assassination of Ms. Bhutto, see this NYT piece. The late Prime Minister Bhutto would likely have been a successor to Pakistan’s current leader Pervez Musharref. This is a stark reminder of the worldwide risks we face from terrorists.
- Economy , Geopolitics , Investing
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