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Market Update

Brighter Fed forecast helps market pare losses

11/24/09 17:59 EST

NEW YORK -A brighter economic forecast from the Federal Reserve helped the stock market pare losses that followed uninspiring reports on consumer sentiment and housing.

Stocks slipped from 13-month highs in light trading Tuesday as gains in health care companies helped offset drops in financial and industrial stocks. The Dow Jones industrial average fell 17 points a day after jumping by 133.

The market strengthened in afternoon trading as the Federal Reserve released minutes from its latest meeting, during which it pledged to keep interest rates low for the foreseeable future and said inflation remained at bay. The Fed raised its expectations for economic growth during the second half of this year, but said unemployment will remain high.

That followed the Conference Board's report that its Consumer Confidence Index rose to 49.5 in November from a revised 48.7 in October. While better than expected, the report shows that consumers remain gloomy heading into the holiday season. A reading above 90 means the economy is on solid footing.

The government also revised its calculation of third-quarter economic growth down to 2.8 percent from its original estimate of 3.5 percent, the latest sign that the recovery is likely to be slow and bumpy.

A report of the fourth straight month of improving house prices in September did little to shore up confidence. The Standard & Poor's/Case-Shiller home price index rose 0.3 percent in September from the previous month.

"Today, as far as the economic data goes, I think we have a bit of a hung jury," said Howard Ward, chief investment officer of the GAMCO Growth Fund.

Ward said a warning from China's central bank that commercial banks there should control their lending also weighed on the market, particularly financial stocks. The comments raised concerns that the Chinese government could take steps to keep growth in check.

The market's modest moves came after a rally on Monday carried the Dow to its highest level in more than a year. A weakening dollar and an upbeat report on housing lured investors back into stocks after a three-day losing streak.

On Tuesday, the Dow ended down 17.24, or 0.2 percent, to 10,433.71 after falling as much as 91 points. The Standard & Poor's 500 index slipped 0.59, or 0.1 percent, to 1,105.65, while the Nasdaq composite index fell 6.83, or 0.3 percent, to 2,169.18.

The dollar's weakness has been a big driver of the stock market this year. Investors have been taking advantage of record-low interest rates to invest in assets other than cash that can earn them better returns.

As the end of the year approaches, however, safe-haven assets like the dollar and Treasurys have become more appealing as investors seek to safeguard some of their gains. At the same time, some investors who missed out on the rally that began in March are looking for opportunities to get in, creating a back-and-forth pattern that has become familiar in recent weeks.

"There are people that have done quite well and maybe they want to protect themselves, but fear and greed still drive the market and I think there are plenty of people out there that want in on the action," said William Rutherford, president of Rutherford Investment Management in Portland, Ore.

A stronger dollar put pressure on commodities. When the dollar rises, it makes commodities and related products more expensive for buyers overseas.

The ICE Futures US dollar index, a widely used measure of the dollar against other currencies, rose 0.1 percent. Oil prices fell $1.54 to settle at $76.02 a barrel on the New York Mercantile Exchange. Gold rose.

Among health care stocks, Medtronic Inc. jumped more than 7 percent after the medical device maker reported a surprising 59 percent increase in its quarterly profit and raised its full-year forecast. It rose $2.94 to $43.25.

Bond prices advanced after a strong auction of five-year notes. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.31 percent from 3.36 percent late Monday. The yield on the five-month note dropped to 2.10 percent from 2.18 percent.

Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where consolidated volume came to a light 3.8 billion shares, compared with 3.9 billion Monday.

Analysts expect trading to be choppy this week amid light trading volume heading into Thanksgiving.

The Russell 2000 index of smaller companies fell 2.23, or 0.4 percent, to 592.58.

Overseas, China's Shanghai index fell 3.5 percent, its biggest drop in three months, after the warning from that country's central bank. Japan's Nikkei stock average fell 1 percent. In Europe, Britain's FTSE 100 fell 0.6 percent, while Germany's DAX index lost 0.6 percent and France's CAC-40 dropped 0.8 percent.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
COMMENTS ( 18649 )
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GETKICKSONRTE66
10:29PM Nov 24 2009 
Oh great another copy & paste poster --- grrrrrr
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popehellllp
This comment has been deleted.
AJGORM
7:52PM Nov 24 2009 
The development of Modern Industry, therefore, cuts from under its feet the very foundation on which the bourgeoisie produces and appropriates products. What the bourgeoisie, therefore, produces, above all, are its own grave-diggers. Its fall and the victory of the proletariat are equally inevitable.
β€”(The Communist Manifesto)
On the other hand, Marx argued that socio-economic change occurred through organized revolutionary action. He argued that capitalism will end through the organized actions of an international working class: "Communism is for us not a state of affairs which is to be established, an ideal to which reality have to *************. We call communism the real movement which abolishes the present state of things. The conditions of this movement result from the premises now in existence." (from The German Ideology)

While Marx remained a relatively obscure figure in his own lifetime, his ideas began to exert a major influence on workers' movements shortly after his death. This influence gained added impetus with the victory of the Marxist Bolsheviks in the Russian October Revolution in 1917, and few parts of the world remained significantly untouched by Marxian ideas in the course of the twentieth century.
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AJGORM
7:51PM Nov 24 2009 
Karl Heinrich Marx (May 5, 1818 – March 14, 1883) was a German philosopher, political economist, historian, political theorist, sociologist, communist and revolutionary, whose ideas are credited as the foundation of modern communism. Marx summarized his approach in the first line of chapter one of The Communist Manifesto, published in 1848: β€œThe history of all hitherto existing society is the history of class struggles.”

Marx argued that capitalism, like previous socioeconomic systems, will inevitably produce internal tensions which will lead to its destruction. Just as capitalism replaced feudalism, he believed socialism will, in its turn, replace capitalism, and lead to a stateless, classless society called pure communism. This would emerge after a transitional period called the "dictatorship of the proletariat": a period sometimes referred to as the "workers state" or "workers' democracy" .

See, for example, Marx's comments in section one of The Communist Manifesto on feudalism, capitalism, and the role internal social contradictions play in the historical process: "We see then: the means of production and of exchange, on whose foundation the bourgeoisie ************ up, were generated in feudal society. At a certain stage in the development of these means of production and of exchange, the conditions under which feudal society produced and exchanged...the feudal relations of property became no longer compatible with the already developed productive forces; they became so many fetters. They had to be burst asunder; they were burst asunder. Into their place stepped free competition, accompanied by a social and political constitution adapted in it, and the economic and political sway of the bourgeois class. A similar movement is going on before our own eyes.... The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring order into the whole of bourgeois society, endanger the existence of bourgeois property."

Marx argued for a systemic understanding of socio-economic change. He argued that the structural contradictions within capitalism necessitate its end, giving way to communism:
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PMURPH2000
7:50PM Nov 24 2009 
Wrong. Time for limited government. Ron Paul 2012
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