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The major headlines in the stock market today include: the ECB's about to release its balance sheet – which is quite scary, Spain is about to request a full-fledged bailout, and disappointing motor vehicle sales follow an unexpectedly good manufacturing report.
Here's a closer look.
- Europe is nowhere near fixed- Stocks opened higher Tuesday on hopes that Spain would request a bailout for the entire country and not just the banks. This drove the markets higher but stocks have since pared gains after digesting the release of the European Central Bank's balance sheet which showed $21 trillion in assets and $22 trillion in liabilities. Never mind that there are more liabilities than assets and no equity to speak of, the questions economists are asking is where is all this money, who is accountable for it and can we even trust these numbers to be accurate.
Perhaps the most troubling news from overseas is the record unemployment of 11.4% in the Eurozone. Spain and Greece continue to have unemployment above 25% and Spain's youth unemployment is above 50%. "Youth unemployment, especially if prolonged, threatens to harm the self-esteem and economic potential of young people now and in the future," Jonathan Todd, a spokesman for the European Commission, said in a statement on Monday after the release of joblessness figures. "This could also pose a serious threat to social cohesion and increase the risk of political extremism," he said. "E.U. institutions and governments, businesses and social partners at all levels need to do all they can to avoid a "lost generation,' which would be an economic and social disaster."
- U.S. auto sales rise but not as much as foreign cars – Also bringing stocks down today were mixed U.S. auto sales during September. Chrysler led automakers in the U.S. with a 12% increase from a year ago but General Motors Co. (NYSE: GM) reported just a 1.5% increase and Ford Motor Co. (NSYE: F) saw sales slip 0.1%. Overseas Toyota Motor Corp (NSYE ADR: TM) announced sales increased 42% while Volkswagen's jumped 34%.
- U.S manufacturing grows but still weak- Manufacturing in the U.S. expanded for the first time since May fueled by new orders. The Institute for Supply Management's factory index, released on Monday, increased to 51.5 in September up from a three-year low of 49.6 in August. New orders rose to 52.3 from 47.1 and September marked the first time in four months the overall reading was above 50 and did not contract. The unemployment index gained to 54.7 from an almost three-year low of 51.6 in August but is still probably too low to impact Friday's upcoming jobs report. "This report removes some of the concern that manufacturing is contracting, even though we're definitely seeing slower growth," Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, who projected a reading of 50.2 told Bloomberg News. "The details look pretty good. Overall, we're looking at economic growth that's moderate but not enough to bring down the unemployment rate significantly."
Investors: Data like this that points to a slow-growth economy reiterates why income is key.
Another manufacturing report by London-based Markit showed that manufacturing activity in the U.S. came in at 51.1 in September and averaged 51.4 in the third quarter, both three-year lows. While the U.S. manufacturing numbers continue to be stagnant they are better than recent manufacturing reports from overseas. China's purchasing mangers' index barely budged, inching up to 47.9 in September from 47.6 last month and was the 11 straight month manufacturing contracted in China. Manufacturing in the Eurozone measured by Markit's PMI contracted for the 14th consecutive month with a reading of 46.1.
- Stocks to watch today- Google Inc. (Nasdaq: GOOG) stock hit an all-time high today, just under $766 before retreating and is down 1% as of noon.
ArQule Inc. (Nasdaq: ARQL) is today's biggest loser. The pharmaceutical firm said it will discontinue its Phase 3 clinical trial on a drug to treat non-small cell lung cancer, after an independent committee concluded that the study wouldn't meet its primary goals of improved overall survival. ARGL stock is down 55% as of noon.
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- Money Morning:
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- Bloomberg News:
Manufacturing in U.S. Expands Unexpectedly as Orders Rise
- The New York Times:
Unemployment in Euro Zone at Record High