Federal Reserve’s Beige Book slams stocks

Stocks left in the lurch after getting no clue about interest rate cut

US stocks closed considerably lower today, Wednesday, 5 September, 2007 after stocks fell once Federal Reserve’s Beige Book was released. Renewed worries about credit markets and weak data on housing sector also took a toll on the stocks. All the ten economic sectors posted loss today.

A government report showed that pending home sales fell to its lowest level since September 2001 amid persisting weakness in the housing and credit markets. Also, Federal Reserve's Beige Book report reflected mixed economic conditions and did not offer much insight for an interest rate cut at the upcoming 18 September meeting.

The Dow Jones industrial Average closed lower by 143.29 points at 13,305.47. The Nasdaq Composite Index, finished down 24.29 points at 2,605.95. S&P 500 finished down 17.13 points at 1,472.29.

Twenty-seven out of thirty Dow stocks ended in red today. American Express, JP Morgan and Wal-Mart led the group of Dow laggards. Home-Depot was one of the three Dow winners. General Motors, which was one yesterday’s key Dow winners fell almost 3% today.

The Beige Book report today showed that economic activity continued to expand across much of the country, that retail sales remain "generally positive," and that wage increases were moderate or steady.

The report suggested that the weakness in the economy is limited to two areas: residential real estate and motor vehicle sales. The housing slump has dampened sales and construction in many markets and hurt furniture sales.

All Indian ADRs suffer loss

Before the bell, an employment report pointed that there was lackluster jobs growth in the private sector, with August proving to be the slowing month for hiring in four years. The monthly ADP employment report showed that only an estimated 38K new private jobs were created in August.

The National Association of Realtors reported that its index of pending home sales index fell 12.2% in July to a reading of 89.9 - the index's lowest level since September 2001. The index had risen 5% in June.

Among Indian ADRs, all ended in red today. Patni Computers and VSNL headed the list with drop of 4.7% and 4.5% respectively. HDFC Bank and ICIC Bank suffered losses of 2.2% and 2.4% respectively.

Crude almost touches $76

Crude-oil futures climbed close to $76 a barrel today as traders wagered that updated data on U.S. crude and motor gasoline would show declining inventories. Traders also showed concern over the potential for damage to energy facilities in the Gulf of Mexico during the Atlantic hurricane season.

Crude for October delivery climbed 65 cents to close at $75.73 a barrel on the New York Mercantile Exchange after reaching $75.78.

At the New York Stock Exchange, volume neared 1.4 billion shares, with declining stocks outpacing advancing issues 3 to 1. At the Nasdaq, more than 1.9 billion shares traded hands as decliners topped advancers by a ratio of more than 2 to 1.

For tomorrow, traders’ attention will be focused on economic data to help set the tone of trading. At 8:30 ET, the Labor Dept. will report initial jobless claims, as well as a revision to Q2 productivity. That will be followed by Energy Dept.'s weekly inventories report at 10:30 ET.