Wall Street Declines On Economic NewsInvestors on Wall Street on Wednesday wiped out all gains made in earlier sessions, responding to more bad economic news. U.S. stocks dropped precipitously, with the Dow Jones industrial average shedding 245 points. Nasdaq and S& P both were down 3 percent.
Stock futures pointed to a lower open on Thursday after another report showed dismal retail holiday sales.
In the U.K., the Bank of England lowered its key interest rate by half a percentage point to 1.5% on Thursday - the lowest rate since the bank was founded in 1694. The cut was made as policy makers attempt to stem the credit freeze from plunging the country deeper into recession. The European Central Bank has also cut its key interest rate by 1.75 percent points to 2.5 percent since October, and has said it may cut it further next week.
The Labor Department says initial jobless claims totaled 467,000 in the week ending January 3, down from a revised total in the prior week. The report comes a day before the government's December jobs report, which is expected to record a decline of 475,000 jobs in December, pushing the unemployment rate to 7 percent from 6.7 percent in November. Without December included, in 2008 the U.S. economy lost more than 1.9 million jobs.
Retailer Report More Grim Sales
It's a bad economy when even retailer giant Wal-Mart reports sales below Wall Street estimates, showing the enormous drop in sales in the weakest holiday sales season in 40 years. Wal-Mart reports its same-store sales, or sales at stores opened at least one year, rose 1.7 percent. When fuel sales at Wal-Mart stores that sell gas are included, the gain was 1.2 percent. Wal-Mart has cut its fourth-quarter earnings outlook. Retail analysts had expected a 2.8 percent increase.
Retailers reporting huge sales drops included Sears, Kmart and Limited Brands, and all three lowered earnings reports. Also reporting a drop of 4 percent in same store sales was wholesaler Costco, citing the impact of lower gas prices as a reason for the drop. Costco ended up posting a 4 percent gain in total sales. Retail analysts note lower income workers are hurting, and consumers are cutting back on discretionary spending and say the Wal-Mart sales report shows the economy is in worse shape than experts had predicted.
Obama's Immediate Action on Economy
In a speech that President-elect Barack Obama will give on Thursday in Fairfax, VA he will warn that immediate steps are needed by the government to revive the economy and will call for passage of his proposed $775 billion stimulus plan. Without these immediate steps by the government, family incomes will drop, the country's unemployment rate could reach double digits and the nation would risk losing a generation of potential and promise.
In excerpts from his speech, Obama says while his recovery plan will add to the deficit already predicted to top $1 trillion, he's not just throwing money at the country's problems. Saying that he knows that the country can't depend on government alone to create jobs or long-term growth, he adds that only the government can give the short-term boost needed to lift the country from a recession he describes as "deep and severe."
His speech is billed by his aides as a "major" economic address and is part of his wider pitch to Congress and the country. His speech, aides say, will call on the use of government's full arsenal of tools to unfreeze the credit markets and a broader effort to stop home foreclosures. Obama will also promise to overhaul financial markets' regulation to crack down on "reckless greed and risk-taking" on Wall Street to restore confidence in markets.