Archived Story

Stock market tumbles

Published 10:52am Tuesday, December 2, 2008

Wall Street headed toward a higher open Tuesday, following a now-familiar pattern of snapping back after a huge selloff. Investors, while looking for bargains, are focusing on the health of retailers and automakers.

The stock market suffered one of its worst days since the start of the financial crisis on Monday as investors responded to a string of bad economic news by fleeing to the sidelines. Among the day’s events: confirmation that the U.S. has been in a recession since December 2007. While the news did not come as a surprise, it underscored the growing concerns about the impact of a severe and prolonged downturn.

Some bargain hunting is to be expected Tuesday after the slide that took the Dow Jones industrials down 679.95 points, but investors will also be watching for any clues about the economy.

The market, worried about consumer spending that is crucial for an economic recovery, was again focusing on retailers, some of whom were reporting third-quarter earnings. Sears Holdings Corp., battered by hefty charges and weak results at its U.S. department stores and Kmart locations, reported that it swung to a loss in the quarter. The company has previously said it will close eight more underperforming stores this year.

Office supply chain Staples Inc., meanwhile, said its third-quarter profit dropped 43 percent because of hefty charges from restructuring and an acquisition. Excluding the charges, results topped Wall Street estimates. Revenue rose 35 percent, even though North American retail sales suffered.

Monday’s stock selling began on concerns about retail sales; investors were disappointed by reports of only modest sales gains during the Thanksgiving weekend. The crucial holiday shopping season looks to be one of the weakest in decades, a troubling sign for stores and the overall economy.

But Wall Street is hopeful for some sort of resolution for the nation’s top three automakers, who are scheduled to submit to Congress Tuesday their plans for remaking themselves with government money. General Motors Corp., Ford Motor Co. and Chrysler LLC are seeking $25 billion in government support.

Major carmakers are also expected to report U.S. sales figures for the month of November Tuesday, with analysts expecting grim results as the recession curtails demand.

Dow Jones industrial average futures rose 130, or 1.60 percent, to 8,269. Standard & Poor’s 500 index futures rose 15.10, or 1.85 percent, to 830.90, while Nasdaq 100 index futures gained 20.50, or 1.87 percent, to 1,115.00.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.75 percent from 2.76 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.11 percent from 0.03 percent late Monday.

The market’s steep drop on Monday ended a five-day rally — the first such winning streak for the Dow and the S&P 500 since July 2007. But it also fits a pattern that has become the norm on Wall Street, with the market making a big advance, only to quickly falter on the first sign of more bad news.

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