U.S. stocks and exchange traded funds (ETFs) start the week off on a sour note, as investors are worried about lower expectations for the global economy.
The World Bank has cut its 2009 global growth forecast, stating that the global economy will shrink by 2.9%, with global trade declining by 9.7% and total gross domestic product for high-income countries forecast to contract by 4.2%, resulting in economic growth of developed countries to decline by 1.2%. To add to this, the bank states that a drop in investment in developing nations will increase poverty levels. In regard to emerging markets, GDP in Latin America is expected to shrink by 2.3% and East Asia is expected to post a 5% expansion, much supported by China’s stimulus-fueled growth.
On a separate note, drugstore giant Walgreens (WAG) fell short of expectations by posting a slightly lower-than-expected quarterly profit. It reported third-quarter earnings of $0.53/share compared to the %0.56/share forecasted by analysts. Walgreens has been revamping its operations by cutting jobs, opening fewer stores that it originally planned and trimming the selection of items that it carries in an attempt to return to double-digit earnings growth. Unfortunately, this strategic plan has also caused the company’s selling and general expenses to increase and eat away at is 8% increase in sales. As for the future, the company remains optimistic and sees an upward horizon. The news sent the Retail HOLDRs (RTH) down nearly 1% in morning trading; WAG is 7.3%.
Despite selling more than one million versions of its newest iPhone, Apple (AAPL) was unable to ignite a spark in the technology sector. The release of the new phone has cured the innovative technological fix that many needed and is boasting to be one of the greatest phones released by Apple. Overall, the Technology Select Sector SPDR (XLK) was down 1.6% in intraday trading; AAPL is 7.1%.
Black gold has retreated a bit, trading around $68/barrel in electronic trading on the New York Mercantile Exchange. Many investors believe it is hard for crude to sustain its high levels as weak economic news continues to be released. The United States Oil Fund (USO) is down 3.2% in morning trading. Meanwhile, some analysts are calling for the 68% year-to-date run-up in gas prices to come to a halt today or tomorrow, but that unrest in Iran and pipeline attacks in Nigeria could reverse any decline.
Overall, all three major U.S. indexes are in negative territory, with the Dow Jones Industrial Average down 1.4%, the S&P 500 down 1.8% and the Nasdaq down nearly 2%.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.