By Carlos Guillen
Stocks have broken below support and are heading lower. The situation in Greece continues unsolved, and our fiscal cliff dilemma is still in the minds of investors. Retail sales slipped a bit worse than expected, and the producer price index also declined below expectations.
While the bulk of the most recent data has been showing that the consumer has been holding strong in terms of confidence and spending, retail sales data showed a worse than expected slip. According to the U.S. Census Bureau, retail sales during October decreased month-over-month by 0.3 percent, worse than the Street's consensus estimate calling for a 0.2 percent decline. The decline in retail sales came after three consecutive months of gains that marked the best back-to-back retail sales showing since at least late 2010. However, retail sales for September were revised higher from 1.1 percent to 1.3 percent. Excluding automobile related revenues, retail sales were flat month-over-month, worse than the Street's consensus estimate calling for a 0.1 percent rise. Of the thirteen categories that make up the result, eight declined, led by a 1.9 percent decline in building materials and garden equipment, followed by a 1.8 percent decline in non-store retailers. Given the importance of consumer spending, as it represents 70 percent of gross domestic product (GPD), the slide in retail sales may be an indication that GDP growth in the fourth quarter may not come in as strongly as many expect.
Quite surprisingly, wholesale prices fell in October, as falling fuel and vehicle costs led the decline. According to Labor Department, the producer price index declined 0.2 percent last month after rising 1.1 percent in September. The result contradicted the Street's consensus estimate calling for a 0.1 percent gain.
The Dow Jones Industrial Average broke below its 12,750 support level, and it is now looking for its next support at 12,500. Tomorrow we will get more economic data points that may assist a rebound, but given the continuing debt situation in the European Union and our own fiscal cliff debacle, we are not holding our breath.
By David Urani
The markets were hanging in there before the opening bell but really fell into a tailspin with a couple of international news items around 10:00. With protests going on all throughout Europe today, EU economics commissioner Ollie Rehn may not have settled nerves. Although he did approve of Spain's budget measures for this year and next, he claimed that the country wasn't doing enough to meet its 2014 targets. Of course, I don't think many people on the Street necessarily expected that Spain would be within its budget goals but an already shaky mood on Wall Street seems easy to rattle lately. The Spanish 10-year bond yield ticked a little higher and is close to breaking above 6.0% again for the first time since September.
Concurrently, the Middle East is heating up, with Israel assassinating several Hamas leaders, including their military chief. That's triggered fierce retaliatory talk from Hamas, and reports that Israel is already geared up for a potential ground war. Oil started the day down but quickly spiked up from $85.00 to $86.40.
Typically those events probably wouldn't be ingredients for a big selloff like this but following the news, the market seemed keen to accelerate down through that 12,750 support point for the Dow.
Dow Jones - Intraday