Weak data on jobs and exports, along with concerns regarding passage of an automaker bail-out package, weighed on stocks Thursday. The dollar weakened against a basket of its trading partners as traders priced in a 85% probability for a 75 basis point rate cut at next week's FOMC meeting. Meanwhile, Senate passage of the automaker bail-out package was looking more and more in doubt.
"The effective funds rate has been around 0.25% for several weeks as the Fed expanded their balance sheet," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "Gold hit $832 an ounce today, just $1 off the recent peak from Nov. 25. With the printing presses running overtime, gold may be set to make a serious run."
New claims for unemployment benefits were the most since November 1982 and exports slowed for a third month in October. Exports prevented overall contraction in output during the first half of the year but may contribute to a 5% annualized decline in GDP during the fourth quarter, with the outlook from that point decidedly negative.
U.S. household net worth decreased 4.7 percent in the third quarter, the fourth consecutive quarterly decline, as real estate and financial assets lost value in the recession, a Federal Reserve report showed on Thursday.
At the close of floor trading on the NYSE, the DOW was on 8565.09 after falling 196.33 points (-2.24%). The S&P closed on 873.59, down 25.65 points (-2.85%) while the NASDAQ finished the day's trading on 1507.88 with a loss of 57.60 points (-3.68%). Treasuries rose, pushing yields near record lows, after the government sold $16 billion of 10-year notes at an auction at the lowest yield ever. Government debt is on pace for a sixth consecutive week of gains after the 10-year note sale attracted stronger-than- average demand compared with the previous 10 auctions.The yield on the 2-year note fell 6.8 basis points to 0.779% while yield on the benchmark 10-year note lost 7.5 basis points to 2.617%. The dollar weakened against a basket of it's largest rading partners. The greenback was lower by 2.57% against the euro, 1.55% against the pound and 2.35% against Australia's dollar. The greenback also fell 1.15% against the yen as stocks declined.
As the economy slowed and the job market weakened, household debt contracted 0.8% in the July-September period, the first quarterly decline since the Fed began compiling the report in 1952. Home mortgage borrowing fell 2.4%, the sharpest drop on record, according to the U.S. central bank's "Flow of Funds" quarterly report.
NYMEX crude oil for January delivery rose $3.91 (8.98%) to $47.43 per barrel.
COMEX gold for February delivery rose $12.10 (1.50%) to $820.90 per ounce.