Stock market is ending the week on a sour note
NEW YORK — After months of worrying about Europe, now investors are getting concerned about Asia too.
U.S. stocks moved lower Friday morning following unsettling reports out of China and elsewhere in Asia. China's export growth plunged, Singapore's economy shrank and South Korea's central bank issued pessimistic predictions.
How China and other Asian countries fare is hugely important to both the U.S. and Europe. China, the world's second-largest economy, has managed to keep growing even throughout the world recession and its aftermath, propping up global markets while other countries sagged.
The news from China is also a reminder that almost nowhere is safe from the effects of the European debt crisis. The European Union is China's biggest trading partner, and sluggish demand in Europe is largely what drove down China's export growth.
"There are three big elephants in the room," said Marty Leclerc, chief investment officer of Barrack Yard Advisors in Bryn Mawr, Penn. "A slowdown in Asia growth, the European crisis ... and the U.S. `fiscal cliff.' " Leclerc was referring to tax increases and spending cuts that are set to kick in at the beginning of 2013.
The Dow Jones industrial average was down 28 at 13,137 as of 11:30 a.m. The Standard & Poor's 500 is down two to 1,400. The Nasdaq composite index is down six to 3,012.
European markets were mostly lower. Benchmark indexes fell in France, Germany and Spain. Spain's long-term borrowing costs, measured by the yield on the 10-year Spanish government bond, edged higher, to 6.86 percent from 6.80 percent. That means investors are nervous about Spain's ability to repay its debts.
Europe itself, the cause of so much consternation, was fairly quiet. Leaders of the 17 countries that use the euro are fighting over how to resolve the region's debt crisis. There are sharp differences between weaker countries like Greece, which have needed financial bailouts, and the stronger countries like Germany, which often foot the bill for those bailouts.
On Friday, an influential German business group warned against a bond-buying plan that European leaders have proposed. That would presumably help lower the borrowing costs of weak countries like Spain and Italy, but the German business group said it would "pose a massive threat to the functioning of the monetary union."
Leclerc, however, is looking for European companies to invest in. Stock prices for some have fallen so low that he believes they're a compelling investment. "We tend to follow where the misery is, because for a long-term investor that is often the greatest opportunity," Leclerc said.
Manchester United, the British soccer club, went public at $14 per share and languished, rising 1 penny by late morning. Though widely popular as a soccer team, Manchester United is also ridden in debt and, at 134 years old, not exactly a high-growth company.
Yahoo fell 83 cents to $15.18, a loss of 5 percent. Investors were miffed because they had been expecting Yahoo to distribute most of the proceeds from an upcoming sale back to shareholders, but a regulatory filing late Thursday revealed that new CEO Marissa Mayer could scrap that plan.
Among other stocks making big moves, J.C. Penney jumped 5 percent, rising $1.02 to $23.12. Even though the retailer reporting plummeting sales and a wider-than-expected loss, investors sent the stock higher after the new CEO, former Apple executive Ron Johnson, laid out more of his vision for turning around the struggling department store company.
Chesapeake Energy fell 2 percent, slipping 38 cents to $19.93, after reporting that the federal government is investigating whether there were antitrust violations relating to its purchase of some oil and gas land in Michigan.
It's been a week without much direction for the stock market. Stocks rose incrementally on Monday and Tuesday, then end mixed Wednesday and Thursday. The moves have all been small, and investors don't seem to have too much conviction either way. There's been a lack of major economic developments or European summits to guide them. It's expected that the lull could last through most of August, when many traders are on vacation.
China said Friday that its export growth slumped to 1 percent in July from more than 11 percent in the previous month, a sign of anemic demand in other countries. Growth in imports fell to about 5 percent from 6 percent, a sign of lower demand within China.
To be sure, problems in China are a different scale from Europe's: By most measures China is still growing, just at a slower rate. Many countries in Europe are shrinking.
Singapore reported that its economy shrank in the second quarter, also hurt by lower demand for its goods. And South Korea warned that the European debt crisis would hurt its own economy for a sustained period.
China's performance raises questions about whether its government will step in more decisively to try to fix things, but it's also hard to predict if those efforts would help. The government has already cut interest rates twice since June to try to spur lending and borrowing, and it is spending more on public works like infrastructure.
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