Weak Economic Data Spark Stock Sell-Off

Includes: DIA, QQQ, SPY
by: Midnight Trader
  • Dow Jones Industrial Average down 250.82 (-1.96%) to 12,573.57
  • S&P 500 down 30.18 (-2.23%) to 1,325.51
  • Nasdaq Composite Index down 71.36 (-2.44%) to 2,859.09


  • Hang Seng Index down 1.30%
  • Shanghai China Composite Index down 1.40%
  • FTSE 100 Index down 0.99%

Stocks finished lower Thursday after new data found growth in U.S. manufacturing activity slowed to its lowest pace in 11 months and the number of Americans filing new unemployment claims fell only slightly from last week. Other data from the Philadelphia Federal Reserve showed factory activity in the mid-Atlantic region contracted for a second month in a row in June while home resales fell in May. All 10 industry sectors in the S&P 500 finished with big declines, with the deepest plunge among energy and material stocks after commodity prices retreated on demand worries following weak economic data.

The June "flash" manufacturing Purchasing Managers Index fell to 52.9, down from a 54.0 reading in May as weaker demand from Europe and large emerging markets dented sales for a second month, according to the financial information firm Markit. The June reading was the lowest since last July although it stayed above 50, indicating an expansion in activity. Weak PMI data also was reported for Europe and China.

In a separate report, initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 387,000, the Labor Department said this morning. But the four-week moving average for new claims rose 3,500 to 386,250, the highest level since early December.

U.S. home resales fell in May and the median sales price rose only because of a drop in sale of lower priced homes, casting a shadow on the country's nascent housing market recovery. The National Association of Realtors said on Thursday that existing home sales slipped 1.5% to an annual rate of 4.55-million units last month. That was in line with analysts' expectations.

Stocks extended their sell-off after a mid-day report said Spanish banks likely would need about $78 billion (62 billion euros) in additional capital to withstand a worst-case economic scenario. Oliver Wyman Ltd. - one of two consulting companies hired by the Spanish government to conduct stress tests on the nation's banks - estimated that the financial system would need between 51 billion euros and 62 billion euros should Spanish gross domestic product shrink by 6.5% and house prices fall as much as 60% from their peak. Roland Berger Strategy Consultants said banks would require 51.8 billion euros in that scenario.

Also weighing on equities today was a Bloomberg report that Moody's Investors Service may announce credit downgrades for as many as 17 lenders and securities firms soon after the end of today's regular session.


(+) ONXX, FDA advisory panel supports company's blood-cancer treatment

(+) SUNH, Receives $8.50-a-share buyout offer from Genesis Healthcare

(+) EGLE, Lenders agree to convert $1.13 billion debt to 3-year term loan

(+) CHTP, Reports positive Phase III trial results for anti-dizziness medication

(+) RAD, Reports lower-than-expected Q1 loss; forecasts improved FY12


(-) MU, Reports wider-than-expected Q2 net loss

(-) POZN, FDA says more testing likely needed for prospective ulcer drug

(-) BBBY, Guides Q2 EPS below Wall Street expectations

(-) RHT, Q1 deferred billings trail expectations by 2% to 3%

(-) CELG, Withdraws EU application for cancer drug