Marc Pado Comments: Stocks Get No Help From The Economy
July 28, 2010, TheStreet.com
Stocks finished Wednesday's session in the red after the Federal Reserve's beige book revealed some fissures in the nation's economic recovery. Stocks had already been under pressure after a government report showed an unexpected drop in June durable goods orders.
The Dow Jones Industrial Average shed 40 points, or 0.4%, to 10,498. The S&P 500 lost 8 points, or 0.7%, to 1106, and the Nasdaq shed 24 points, or 1%, at 2265.
The Fed released its July beige book in the afternoon. The collection of anecdotal reports from the Fed's 12 reporting districts, which will be used by the Federal Open Market Committee to help gauge economic conditions during its next policy-setting meeting on Aug. 10, offered a softer view of the economy.
In its June summary, the Federal Reserve highlighted economic improvement, though modest in most instances, across "all twelve Federal Reserve Districts." Though overall growth continued in this most recent July assessment, the Fed found that economic activity in its Cleveland and Kansas City districts leveled, while the Atlanta and Chicago districts reported a slowing pace. The report went on to say factory activity "slowed or leveled off" in several districts, though the labor conditions "improved modestly across the districts."
The results more or less matched the sensibility in the market, as a steady drumbeat of negative indicators of late have weighed on sentiment despite some upbeat corporate earnings and guidance announcements. Investors were particularly eager for some clarity regarding economic conditions since Fed Chairman Ben Bernanke described the economic outlook as "unusually uncertain" in his recent testimony on the economy and monetary policy on Capitol Hill.
"Really, there was nothing all that surprising in the beige book. It basically said what we already know from the other releases: that things are slowing and certain regions are slowing more than others," said Marc Pado, U.S. market strategist at Cantor Fitzgerald, who also believes the subsequent market sell-off was due to waning enthusiasm for Thursday's initial claims report and Friday's read on second-quarter GDP. "Overall, it's confirmation of what people felt in general. The economy slowed in May and June and continues to do so in July."
Overseas Wednesday, Hong Kong's Hang Seng rose 0.6%, and Japan's Nikkei gained 2.7%. The FTSE in London was lost 0.9%, and the DAX in Frankfurt shed 0.5%.
