- The Washington Times - Monday, February 2, 2009


Wall Street closed mixed Monday, the Dow falling below 8,000, dragged down partly because of more jobs on the chopping block.

The Dow Jones Industrial Average pared it losses by the close, ending down 64.11, or 0.80 percent, to 7936.75. The tech-heavy Nasdaq rose 18.01, or 1.22 percent, to 1494.43. The broader Standard & Poor’s 500 dipped 0.45, or 0.05 percent, to 825.43.

The midday announcement by Macy’s Inc., the nation’s biggest department store, that it was cutting 7,000 jobs — 40 percent of them executive positions — and slashing its dividend from 13.25 cents to 5 cents kept the Dow from recouping more of its early losses and soured the stocks of other major retailers. Industrials also slumped, but tech stocks did well, among them Verizon, Microsoft and Intel.

It marked the worst day for the Dow since Nov. 20, CNBC said. Volume was light.

The price of a barrel of light, sweet crude oil dropped below $41 a barrel on the New York Mercantile Exchange, which could mean lower costs for gas.

Consumer spending fell in December for a sixth successive month, dropping 1 percent, the Commerce Department reported. It was worse than the 0.9 percent rate that had been expected by analysts and was an obvious drag on the markets, though weak spending had been expected because of the recession.

Consumer spending for the year rose a weak 3.6 percent, the smallest annual increase since 1961, President Kennedy’s first year in office.

Incomes fell by 0.2 percent, a drop better than expected but an indication of rising unemployment. At the same time — again a reflection of consumers refusing to spend — the rate of savings rose to 3.6 percent of after-tax incomes, the highest since the 4.8 percent in May, when tax rebates started coming through.

Incomes for all of 2008 increased 3.7 percent, the weakest rise since they went up by 3.2 percent in 2003, during President George W. Bush’s first term.

In a spot of good news, a private group’s manufacturing index increased to 35.6 in January from an upwardly revised 32.9 in December, but economic activity in manufacturing failed to grow last month for the 12th consecutive month.

The 35.6 reading by the Institute for Supply Management, a trade group of purchasing executives, was better than the 32.6 forecast by economists surveyed by Thomson Reuters.

“Comments from our respondents indicate that it will take a recovery in automobiles and housing for the manufacturing sector to once again prosper,” wrote Norbert J. Ore, chair of the group’s Manufacturing Business Survey Committee.

“On a positive note, the prices index continues to indicate significant deflation in the prices that manufacturers have to pay for their inputs, and this should ultimately be good for the consumer,” he wrote in a report.

Investors seem to be holding back, put off by poor corporate earnings reports and uncertainty over whether the Obama administration will create a “bad bank” to take over the debts of the major banks to make it easier for them to lend again. Such a bank could cost hundreds of billions of dollars to establish.

President Obama, in an interview on NBC-TV’s “Today” show that was taped Sunday, sidestepped the “bad bank” question but said taxpayers would become owners of stock of some financial institutions.

“It is likely that the banks have not fully acknowledged all the losses they’re going to experience,” he said. “They’re going to have to write down those losses, and some banks won’t make it.”

But he expressed assurances that “all deposits are going to be safe for ordinary people.”

The markets have come off what reportedly was the worst January in history, with the Dow and the S&P 500 each racking up losses of more than 8 percent. Even more losses could be in store this month because of expected poor earnings reports in the face of a worsening recession, now in its 14th month.

On the corporate side, toy maker Mattel said its profits for the fourth quarter of 2008, which includes the holiday shopping season, fell a whopping 46 percent, far below analysts’ expectations. Consumers just were not spending. Humana Inc., the health insurer, said its profits during the same October-to-December period dropped 28 percent.

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