Midday Market Update: Stocks Extend Losses on Continued Recession Fears

By , Money Morning •

By Jennifer Yousfi
Managing Editor

Uncertainty over the future of the U.S. economy sent stocks lower again today (Friday), erasing slight early morning gains as a research note from a Sanford C. Bernstein & Co. analyst cautioned that the first quarter would see another big drop in profits for brokerage and mortgage firms.

"The reason behind all of this volatility is because the market is unsure of the longer-term direction of the U.S. economy," Robert Pavlik, chief investment officer of Oaktree Asset Management, told MarketWatch.

At noon ET, the three major U.S. stock indices were all down. The blue-chip Dow Jones Industrial Average Index dropped 68.63 points (-0.56%), to trade at 12,215.67. The tech-laden Nasdaq Composite Index lost 21.67 points (-0.94%), to reach 2,278.11. And the broader Standard & Poor's 500 Index lost 8.09 points (-0.60%), to settle at 1,334.44.

The energy and utilities sectors had slight gains, with the consumer cyclical and technology sectors posting the largest declines.

Brad Hintz, an analyst at Sanford C. Bernstein & Co., predicted that profits would fall 40% in the first quarter. In a note to clients, Hintz warned there is "more pain than gain" ahead.

"We do not think the stocks fully reflect the severity or duration of the financial headwinds facing the companies," Hintz wrote in a research note to clients dated today.

Asian markets headed lower on continued concerns of a U.S. recession.  Japan's Nikkei Index lost 187.82 points to close at 13,500.46.  Hong Kong's blue-chip Hang Seng Index dropped 317.96 points to close at 23,305.04.

"It seems clear now that the financial problems in the U.S. are quite deep and won't be taken care of that easily," Takahiko Murai, general manager of equities at Nozomi Securities, told Reuters.

In Europe, indices had gains in late afternoon trading including the Paris-based CAC40, Madrid's IBEX 35, the Frankfurt-based DAX and London's FTSE 100.

"The markets are being pulled between information on the here and now, which is quite discouraging and hopes that more aggressive action to try to reflate the U.S. economy in say nine months time, things will look a lot better," Andrew Bell, a European strategist at Rensburg Sheppards, told Reuters.

At midday, the dollar had lost ground against the euro [down 0.439%], the yen [down 0.908%], and the pound sterling [down 0.732%].

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