Mon, December 06, 2010
Business > Markets

US stocks fall on economy concerns; Dow off 30

2010-12-06 15:22:30 GMT2010-12-06 23:22:30 (Beijing Time)

NEW YORK – Stocks fell slightly in early trading Monday after Federal Reserve Chairman Ben Bernanke said the economy is still struggling to become "self-sustaining" without government help.

Bernanke, in a taped interview with CBS' "60 Minutes" Sunday, argued that Congress shouldn't cut spending or boost taxes given how fragile the economy remains. He also said it could take four or five more years for unemployment, now at 9.8 percent, to fall to a historically normal 5 percent or 6 percent.

That's taking some juice out of the market's recent rally.

In early trading, the Dow Jones industrial average fell 30.29, or 0.3 percent, to 11,351.80. The Standard & Poor's 500 index dropped 3.68, or 0.3 percent, to 1,221.03. The Nasdaq composite index fell 6.35, or 0.3 percent, to 2,585.11.

Last week, the Dow Jones industrial average rose 2.6 percent, its best weekly gain since hitting a 2010 high on Nov. 5. The Dow is up 8.9 percent for the year.

But Bernanke's comments did little to calm investors' fears about the economy, which motivated traders to sell stocks.

"There's going to be continued unease about the recovery," said Oliver Pursche, president of Gary Goldberg Financial Services, an investment management firm.

Treasury prices rose. The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.96 percent from 3.00 percent Friday. Changing yields affect interest rates on a variety of business and consumer loans, including mortgages.

In U.S. corporate news, shares of Barnes & Noble Inc. rose $2.48, or 18.7 percent, to $15.76 after activist investor William Ackman and other shareholders of Borders Group Inc. said they were prepared to finance a $16 per share takeover bid for Barnes & Noble. Shares of Borders rose 19 cents, or 17.6 percent, to $1.27.

Sprint Nextel Corp. rose 20 cents, or 5.2 percent, to $4.13 after the company said it would start phasing out the Nextel part of its network in 2013. That decision follows near-constant subscriber losses since Sprint bought Nextel in 2005.

Kellogg Co.'s shares rose 2 cents to $49.52 after the cereal maker said CEO David Mackay will retire on Jan. 1 and be replaced by Chief Operating Officer John A. Bryant.

No new economic data is set to be released Monday, so investors will likely remain focused on the weak employment numbers from Friday, Pursche said.

The Labor Department reported that the unemployment rate climbed to a seven-month high of 9.8 percent in November. Employers added just 39,000 jobs, far below what economists forecast.

Jobs are essential to a recovery, and economists worry that persistently high unemployment could dampen consumer spending, a key driver of economic growth.

Investors will get additional insights on consumer spending Tuesday, when the government releases data on consumer borrowing. A preliminary report on consumer sentiment from Thomson Reuters/University of Michigan is expected on Friday.

Traders will also be focused on the European debt crisis. Finance ministers from the 16-nation euro zone gathered on Monday to discuss ways to stabilize their currency union and avoid more expensive bailouts.

Britain's FTSE 100 rose 0.5 percent, while Germany's DAX rose 0.1 percent. France's CAC40 was unchanged.

Asian indexes closed mostly lower. Japan's Nikkei 225 lost 0.1 percent, but China's benchmark Shanghai Composite Index gained 0.5 percent.

The dollar rose 0.6 percent against an index of six other heavily traded currencies.


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