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Stocks down on fears of strong economy Original Source Link: (May no longer be active)
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U.S. Stocks Slump for a Third Day on Rate Concerns; Banks Fall
Nov. 30 (Bloomberg) -- U.S. stocks slumped for a third day as a report that the economy expanded more than forecast last quarter rekindled concern about higher interest rates. Financial companies including JPMorgan Chase & Co. led the decline.
The Dow Jones Industrial Average fell 82.29, or 0.8 percent, to 10,805.87. The Standard & Poor's 500 Index lost 8, or 0.6 percent, to 1249.48. The Nasdaq Composite Index was little changed, adding 0.11 to 2232.82.
Reports on Chicago-area manufacturing and consumer spending, along with a regional survey from the Federal Reserve, supported the notion that the central bank will keep raising rates. This week's slide trimmed the S&P 500's November gain to 3.5 percent, still its best performance since July.
``We've had a nice run in stocks ahead of the fact that people thought the Fed was going to pause,'' said Pete McCorry, senior vice president of trading at Keefe Bruyette & Woods Inc. in New York. ``But this signals that the Fed is not at the end of the rate hikes.''
A gain in technology shares including JDS Uniphase Corp. and Google Inc. helped support the Nasdaq.
Economic growth was at an annual rate of 4.3 percent from July through September, the Commerce Department said, the quickest since the first quarter of last year. The revised figure for gross domestic product was more than the 4 percent forecast from economists.
Consumer spending expanded at a 4.2 percent annual pace last quarter, compared with 3.4 percent in the second quarter, the government also said.
The National Association of Purchasing Management-Chicago said its Business Barometer was 61.7 in November, more than the reading of 60 that economists expected. A figure above 50 signals growth. The Chicago purchasers' index of prices paid surged to 94.1 this month, the highest since October 1979.
The regional survey of businesses by the 12 Fed district banks, known as the beige book, reinforced the idea the central bank may have to continue increasing rates. The survey indicated that the economy rebounded in October and November from Hurricanes Katrina and Rita, causing wages to rise. Higher fuel costs also pushed up prices for construction materials and transportation, the Fed said.
Oil for January delivery climbed 82 cents to $57.32 a barrel, rebounding from an earlier loss to also weigh on stocks. A government report showed stockpiles fell last week.
A measure of financial shares had the worst performance among 10 S&P 500 groups, retreating 1.4 percent. Higher borrowing costs erode the value of bonds owned by banks, brokers and insurers, and crimp demand for mortgages and loans. The Fed has boosted its target for the overnight lending rate between banks 12 straight times since June 2004 to 4 percent.
JPMorgan Chase, the third-biggest U.S. bank, slid 71 cents to $38.25. U.S. Bancorp, the sixth-biggest, lost 61 cents to $30.28.
``On the bank side you saw a lot of anticipatory buying because people thought the hikes would stop,'' McCorry said. ``Now they're rethinking that.''
Bank of America Corp. lost 89 cents to $45.89. The chief financial officer of the No. 2 U.S. bank said it was mostly finished making acquisitions after agreeing to spend more than $134 billion since 1998.
JDS Uniphase, the world's largest maker of parts for fiber- optic networks, climbed 22 cents to $2.57. Brantley Thompson, an analyst at Goldman Sachs Group Inc., said JDS Uniphase ``is making the right moves'' to lower costs as demand improves. Thompson rated the stock ``inline/attractive'' in new coverage.
Google rose $1.37 to $404.91, rebounding from its biggest decline in more than a year a day ago. A Stanford Group analyst downgraded the stock yesterday on concerns about sales growth at the world's most-used Internet search engine.
About the same number of stocks rose that fell on the New York Stock Exchange. Some 1.79 billion shares changed hands on the Big Board, 8.4 percent more than the three-month average.
The Nasdaq rose 5.3 percent in November and the Dow average climbed 3.5 percent. Other asset classes have gained along with stocks this month.
In other markets, the U.K.'s FTSE 100 Index lost 67.80, or 1.2 percent, to 5423.20; France's CAC 40 Index dropped 21.32, or 0.5 percent, to 4567.41; Germany's DAX Index fell 6.08, or 0.1 percent, to 5193.40; and Japan's Nikkei 225 Stock Average declined 55.55, or 0.4 percent, to 14,872.15.
Last Updated: November 30, 2005 17:35 EST
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