Michael Kahn who writes the Getting Technical column for Barron’s Online, predicts in the column below that the Dow is headed below 10,000.
Retail hiring looks to be less this Holiday season than last according to survey released today.
Here are the top financial stories of the day:
1) Wall Street down on Europe; bear market fears grow-From Reuters
Wall Street fell for a third day on Tuesday on fears Europe still has failed to tackle its debt crisis, prompting worries the market is headed to new lows for the year.
Investors channeled cash into less risky assets as doubts resurfaced over the political will of Italy and Greece to push through tough budget measures and as Germany hardened its stand against providing more aid. The worries over the European debt crisis renewed fears that the global economy could fall into recession.
The S&P 500 is now down 14.5 percent from its highest point in 2011, reached at the end of April. Though investors have periodically taken heart from signs that Europe has carved out a plan to deal with its festering crisis, confidence has been repeatedly walloped every time there is a development showing that the problems have not been solved.
"We have got a shot at trading the S&P under 1,100 again," said Nick Kalivas, an equity index analyst at MF Global in Chicago. "I don't sense that people are really going to defend the market until something like that occurs."
A similar pattern of fractured confidence exists in bank stocks. Major U.S. banks were among the biggest decliners on Tuesday, with the KBW Bank index off nearly 2 percent. Late on Friday, the Federal Housing Finance Agency sued 17 large U.S. banks over subprime mortgage-backed bonds, compounding fears about the health of the sector.
JPMorgan and Bank of America, both subjects of the suit, fell more than 3 percent on Tuesday.
The CBOE Volatility Index, or Vix, a measure of expected market turbulence, posted its biggest gain in nearly two weeks, climbing 9.4 percent to 37.08.
"Right now there is a tremendous amount of uncertainty," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut. "There is a decent chance that we are in a bear market."
The Dow Jones industrial average dropped 100.96 points, or 0.90 percent, to 11,139.30. The Standard & Poor's 500 Index fell 8.73 points, or 0.74 percent, to 1,165.24. The Nasdaq Composite Index lost 6.50 points, or 0.26 percent, to 2,473.83.
Traders are monitoring lows set by major global indexes during the selloff in the first half of August. So far, only Germany's DAX, down nearly 25 percent this year, and Japan's Nikkei have fallen below those levels.
The S&P 500 hit a 2011 low of 1,101 on August 9.
European shares extended losses on Tuesday, after falling more than 4 percent on Monday, hitting their lowest close in more than two years on worries the euro zone debt crisis was deteriorating. The PHLX Europe sector index slumped 3.5 percent. U.S.-listed shares of Credit Suisse fell 12.9 percent to $23.84.
Gold stocks got a lift as the price of gold jumped to a record high above $1,920 after Switzerland pegged its currency to the euro in an effort to prevent its rapid appreciation in an extended spat of safe-haven buying.
The precious metal then retreated 2 percent from that level as investors took profits.
The Arca Gold Bugs index, which measures the performance of 16 U.S.-listed gold miners, rose 0.6 percent. Eldorado Gold Corp was the biggest percentage gainer, up 2.4 percent to $21.36.
The Financial Times reported several big U.S. banks, in talks with state officials on settling claims of improper mortgage practices, were offered a deal to limit legal liability in return for a multibillion-dollar payment.
Several brokerages including Nomura cut their price targets on big lenders.
Bank of America Corp lost 3.6 percent to $6.99 and JPMorgan Chase & Co fell 3.4 percent to $33.44.
Among gainers, Sunoco Inc rose 5.3 percent to $38.03 after the energy company said it plans to exit its refining business and focus on its logistics operations.
Packaging company Temple-Inland Inc jumped 25 percent to $30.85 after International Paper Co agreed to buy it for $32 per share. International Paper rose 8.9 percent to $27.77.
Trading volume was lower than usual at 7.9 billion shares on the New York Stock Exchange, the American Stock Exchange and Nasdaq.
Decliners beat advancers by nearly than three-to-one on the New York Stock Exchange. On Nasdaq, decliners beat advancers by about two-to-one.
2) Dow headed below 10,000 as cyclical bear begins-From MarketWatch
A strange technical pattern chronicled here in June suggests that the stock market still has unfinished business to the downside. Given that it correctly forecast the summertime peak, it might be a good idea to pay it heed.
Without rehashing the details from my June 15 column, the “three peaks and a domed house” is a multipart pattern that can describe the ebb and flow at the end of a bull market. See ‘Market’s chart pattern shows trouble in the house.’
At that time, I quoted the work of Ed Carlson, CMT, that concluded, based on the pattern and other factors, that “the stock market has either just peaked or is within one month of peaking to end the two-year old bull market.”
Given that the Dow Jones Industrial Average notched its high-water mark in May and then its final, albeit slightly lower peak in July, Carlson’s was a prescient call.
According to George Lindsay, the master chart reader who discovered the pattern in the late 1960s, there are 28 distinct twists and turns to follow. Just as a porterhouse steak contains two other cuts so too does this pattern. Its second half traces out the same shape as the ubiquitous “head-and-shoulders.” Indeed, the latter pattern dominated much of 2011 trading through July and gave us turns 21 through 25.
The August plunge took the Dow to number 26 leaving but two more milestones to reach.
As of this writing in late August, it appears that the market has reached or is just about to reach number 27 — the peak of a corrective rally in a major decline.
Where does that leave us now? The way Carlson, author of the recently released “George Lindsay and the Art of Technical Analysis :(FT Press 2011), sees it: on our way to number 28 to complete the pattern.
Where will that point be? Technical analysts, including yours truly, are often hesitant to forecast specific price and date combinations. But Carlson is looking for the Dow to drop to its summer 2010 low in the 9,650 area in the middle of next year. Not a pretty picture although thankfully not apocalyptic, either.
There are other factors now in play to keep the bears happy. For starters, this is September and it is the only month to show a net loss over the decades. And given that the past two Septembers have been positive, the odds are stacked fairly high against the bulls this year.
Even nuts and bolts chart reading is serving up bad news. The trend line that supported the bull market from its March 2009 origin has been soundly broken to the downside. So has solid support in existence most of 2011 on the Standard & Poor’s 500, the Nasdaq and the small capitalization Russell 200 index.
In my view, a cyclical bear market has begun.
The good news, according the Lindsay analysis, is that it looks to be of shorter duration than the previous bear market from 2007 to 2009. That means patient investors will have another chance to make some money on the long side starting next year.
3) Tidings Are Gloomy for Holiday-Job Seekers-From The Wall Street Journal
The outlook is dimmer than it has been in several years for workers hoping to get a part-time retailing job for the holiday shopping season, according to a survey of 21 store chains
About two-thirds of the chains polled by consulting firm Hay Group said they would add the same number of workers for their busiest sales period as they did last year, even though many said they expect better holiday sales this year. About 25% said they planned to hire fewer seasonal employees than last year.
The participants ranged from Macy's Inc. to crafts chain Michaels Stores Inc. and home-furnishings retailer Pier 1 Imports Inc. to Coldwater Creek Inc., which sells women's apparel.
The consultants who conducted the survey said they were surprised by the results. "We keep hearing that retailers want to create a more engaging environment for customers," said Maryam Morse, retail practice leader with the Hay Group. "That seems inconsistent with hiring fewer seasonal workers."
DSW Inc., which operates the Designer Shoe Warehouse discount chain, recently reported double-digit sales growth for the fiscal second quarter ended July 31, but it doesn't plan to increase its seasonal hires from last year. Instead, it will give its permanent sales force more hours, if needed, said Carrie McDermott, executive vice president of stores and operations. She said both part-time and full-time workers at the chain have been asking for more work.
Stores are trying to hold down labor costs as they head into the holidays, because they fear they can't pass on other cost increases, such as more expensive cotton, to their customers, said Craig Rowley, vice president and global practice leader for Hay Group's retail practice.
Retailers also point to a double-digit increase in Internet sales as a reason they don't need more in-store sales help. About a fifth of those surveyed said they were expanding their work force in distribution centers, which fill and ship Internet orders and often pay better than stores do.
During the boom that preceded the recent recession, stores routinely added hundreds of thousands of workers before Christmas to handle a surge of shoppers. At the boom's peak, in 2005, retailers added more than 600,000 temporary workers to their rolls. Though seasonal hiring waned during the recession, falling to a low of 231,000 workers in 2008, retail jobs have been a rare bright spot in the national employment picture. Retail jobs account for about 16% of total U.S. employment.
But last year's modest gain in hiring appears to have ended. On Friday, the Labor Department reported that the retail sector lost 8,000 jobs in August as overall U.S. employment remained flat.
Retailers posted mixed sales figures in August, a heavy back-to-school shopping period that often foreshadows sales prospects for the holidays. Hurricane Irene damped sales for the month, while inflation accounted for some of the sales gains.
Meanwhile, the stubbornly high unemployment rate, plummeting consumer confidence and a gyrating stock market have made it difficult for retailers to predict holiday sales. As a result, some retailers say they are still finalizing their seasonal hiring plans. Though Macy's participated in the Hay Group survey, a spokesman said it won't be ready to discuss its plans until the end of September.
Industry experts caution, however, that retailers might hurt their sales by cutting workers. If anything, sales personnel will have to become even more knowledgeable and savvy, if retailers hope to distinguish themselves from online competitors, said Leslie Hand, research director of consulting firm IDC Retail Insights.
"People like to shop, to browse and touch and feel things," Ms. Hand added. "If they can come in your store and get that personal shopper who helps them pick a wardrobe and does it well, there is value in that."
As more retailers control labor costs by scheduling their workers for the stores' busiest times, the percentage of retail workers working part time has risen. So far this year, 59% of hourly retail staff work has been part time, up from 53% in 2009, according to the Hay Group
Quote of the Day from Dave Ramsey.com:
Bad excuses are worse than none. — Thomas Fuller
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