Recession fears hit US Market

Dow slumps more than 550 points in last five sessions

US Market started the new week on a much weaker note dragging last week’s losses further and all the indices lost more than 1% today, Monday, 17 December, 2007. Concerns over economic growth were the main reason for this slide. All ten sectors ended higher lower today led by materials, technology and energy sectors.

Financials also continued to be under pressure after Citigroup downgraded a number of banks. A downgrade on Caterpillar by Morgan Stanley weighed heavily on the materials sector. Crude prices slipped for the third consecutive day.

The Dow Jones industrial Average ended the day with a loss of 172.65 points at 13,167.2. The Nasdaq Composite Index, finished lower by 61.28 points at 2,574.46. S&P 500 finished lower by 22.05 points at 1,445.9.

Twenty-seven out of thirty Dow stocks ended in red today. Alcoa, Caterpillar and Home-Depot were the main Dow laggards. The only three Dow winners were Wal-mart, Citigroup and Honeywell.

Other than Caterpillar, there were other headliners in the materials sector. Ingersoll-Rand announced that it is going to acquire air conditioning system maker Trane for approximately $10.2 billion.

Citigroup downgraded multiple banking stocks that included Bank of America, JPMorgan Chase and US Bancorp.

Before the market opened, regional manufacturing report reported that the New York Empire State Index stood at 10.3 for November. While a number above zero reflects growth, the reading was well below the prior month's reading of 27.7 and the consensus estimate of 20. The weaker than expected regional manufacturing report provided a lift for the Treasury market.

Technology shares the most hit on recession fears

IBM, Apple, RIMM and Google were the most hit technology shares. Shares slipped on anticipation that the economy might be heading towards a recession that might hit the economy early 2008.

All Indian ADRs ended in the red today. VSNL, HDFC Bank and ICICI Bank were the topmost three losers giving up 10.4%, 8.4% and 7.9% respectively.

Crude prices slipped today as traders speculated that demand is likely to slow down due to economic growth concerns. Comments from Organization of Petroleum Exporting Countries (OPEC) official regarding increasing production in next meeting also led to crude prices slipping. This was the third consecutive drop in crude prices. Crude-oil futures for light sweet crude for January delivery closed at $90.63/barrel (lower by $0.64/barrel or 0.7%) on the New York Mercantile Exchange.

As per the Algerian Oil Minister, Chakib Khelil, OPEC may decide to increase quotas when it meets 1 February, 2008. He is expected to take over as President of OPEC on 1 January, 208.

Volume on the New York Stock Exchange topped 1.4 billion shares, and decliners outnumbered advancers by more than 5 to 1. On the Nasdaq, more than 1.9 billion shares changed hands, and decliners topped advancing stocks, also by more than 4 to 1.

Tomorrow, investors will focus on economic reports to set the tone of trading. November's housing starts is due before the market opens. The data will measure how much residential building actually commenced during the past month.