Stocks dropped ahead of a highly anticipated speech Friday morning from Fed Chairman Ben Bernanke at Jackson Hole, Wyoming. Watchers will be looking for hints of future policy.
Most anticipate the Fed will signal additional fiscal easing, with the economy still struggling. It will also be needed to balance monetary tightening enacted by Congress to prevent choking off the economy.
In other news, the Labour Department said Thursday that unemployment claims rose by 5,000 in the week ending August 20 to 417,000, partially a result of thousands of claims from striking phone workers. Investors were looking for jobless claims to fall to 400,000 claims.
The Dow fell 170, or 1.51% to 11,149, the Nasdaq fell 48, or 1.95% to 2,435, and the S&P 500 dropped 18, or 1.56% to 1,159.
Bank of America (NYSE:BAC) was the biggest riser, up 10%, after Warren Buffett's Berkshire Hathaway made a $5 billion investment in the bank. Apple Inc. (NASDAQ:AAPL) shares were down 0.66% after Steve Job's resignation as boss.
Gold rebounded after dropping as much as 3% in early trading. Spot gold last traded at $1777.30 an ounce, up 1.4%, whilst spot silver fell 0.89%, and last traded at $41.22 an ounce.
The iconic leader of Apple Inc. stepped down Wednesday, sending the blogosphere into a frenzy. Steve Jobs co-founded Apple but was ousted in 1985. He returned in 1997, reviving the company and turning it into one of the world’s most valuable corporations. Jobs has been on medical leave since January, having survived a pancreatic cancer diagnosis in 2005. In his resignation letter, Jobs wrote, “I have always said if there ever came a day when I could no longer meet my duties and expectations as Apple's CEO, I would be the first to let you know. Unfortunately, that day has come.” He remains chairman, while former COO Tim Cook takes over as CEO. Investors took the news in stride, as shares are mostly unchanged.
In a move reminiscent of Warren Buffett’s investment in Goldman Sachs Group (NYSE:GS) three years ago at the height of the financial panic, he has placed a $5 billion bet on Bank of America Corp. as the lender is facing doubts from Wall Street, with its shares are trading near two-year lows. In recent days, BofA stock has traded as low as $6.01 a share; it jumped as high as 25.9% to $8.80 on the news but has fallen back to $7.70. The deal allayed fears that the bank would require additional capital. Credit default swaps on BofA for protection of $10 million of debt over five years dropped $68,000 to $305,000.
The SEC is stepping up plans to gather more information from oil and gas companies’ fracking operations, following similar moves by several state governments. Fracking - the use of high water, chemicals, and sand to boost production - has come under fire with environmental groups claiming the method leads to contamination of underground aquifers. The SEC, a department not responsible for environmental health and safety, says its interest in the matter is to ensure investors are aware of a company’s possible risks and liabilities.
Collective Brands Inc. (NYSE:PSS), parent of Payless ShoeSource, Stride Rite, and Keds, said Wednesday it plans on closing approximately 475 underperforming stores in the next three years; more than 300 of them by the end of this fiscal year. Sales have been weak in the key domestic market. For the quarter ending July 30, the company swung to a $35 million loss, compared to a $21.1 million profit a year earlier. Revenue grew 4.9% to $882.4 million, though same-store sales dropped 0.7%. Investors cheered the new plans, sending Collective Brands stock up 20%.
In an annual assessment to Congress of the Chinese military, the Pentagon noted major concerns over China’s growing military power. Some prominent signs of progress include its stealth fighter and aircraft carrier programs. It is also building up a widening edge over U.S.-supported Taiwan. China is slowly closing the technology gap with modern armed forces and may reach that point in 2020. Its cyber attacks are issues already in play.
Commodities trading company Glencore International PLC (LSE:GLEN.L) beat analyst expectations with a 32% increase in revenue to $92.12 billion for the first half and a 57% jump in earnings to $2.45 billion. CEO Ivan Glasenberg says he continues to see robust demand in the commodities market, with very strong growth from China and India. Glasenberg is taking the view that current market conditions have created buying opportunities for the company. Glencore listed its shares in an IPO on May 19. Its stock has fallen 25% since then.