While you were sleeping: Wal-Mart, euro-zone trouble
Nov 16 (BusinessDesk) – The silver lining proved yet again hard to find today as Wal-Mart's profit outlook disappointed and the euro-zone economy fell into recession.
Shares of Wal-Mart dropped, last down 3.7 percent, after the retail giant predicted fourth-quarter profit that missed the mark.
“Current macroeconomic conditions continue to pressure our customers,” Charles Holley, Wal-Mart's executive vice president and chief financial officer, said in a statement.
There was plenty of evidence of that pressure, exacerbated by the effects of Hurricane Sandy. Applications for unemployment benefits jumped more than expected, rising 78,000 to 439,000 in the week ended November 10, according to Labor Department data.
A worrying sign indeed. "We will likely see a step back in job growth," Ryan Sweet, senior economist at Moody's Analytics in West Chester, Pennsylvania, told Reuters.
Separately, data from the Philadelphia Federal Reserve Bank and the New York Federal Reserve Bank showed that indexes of manufacturing shrank in those regions this month.
The latest data only add to the need for President Barack Obama and lawmakers to find a way to avoid the so-called fiscal cliff, a mix of tax increases and spending cuts that will kick in automatically on January 1 and risk hampering the already-fragile economy.
In afternoon trading in New York, the Dow Jones Industrial Average dropped 0.38 percent, while the Standard & Poor's 500 and the Nasdaq Composite Index each shed 0.48 percent.
In Europe, the Stoxx 600 Index ended the day with a 1 percent slide from the previous close. The FTSE 100 and Germany's DAX each dropped 0.8 percent. France's CAC 40 shed 0.5 percent.
There was more bad news for the euro zone economy. The latest data showed that the region's gross domestic product dropped 0.1 percent in the quarter, after a 0.2 percent decline in the second quarter.
A Reuters poll of more than 70 economists predicted the bloc's new recession will extend until the end of the year and 2013 promises little better than stagnation. Conducted before Thursday's data were released, the consensus was for a 2012 contraction of 0.5 percent and only 0.1 percent growth next year.
“The euro zone as a whole has slipped back into recession,” Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, wrote in an e-mail to Bloomberg News.
“Europe’s economic downturn has not only deepened, it has also broadened with the core of the euro zone now much more affected. The bleak economic data out of Europe will further undermine sentiment,” according to Spiro.
In other news, BP said it reached a settlement with the US government to pay US$4.5 billion in penalties, settling all criminal charges and resolving securities claims relating to the Deepwater Horizon oil spill.