Wall Street Wrap for 10 August 2010

Wall Street Wrap for 10 August 2010

New York: US markets were choppy in early trading on Tuesday in anticipation of a US Federal Reserve report due out in the afternoon. Finally, stocks ended in the negative with the Dow Jones down 55 points, the S&P 500 down 7 points and the Nasdaq down 29 points.

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In economic news, government data showed business productivity fell at an annual rate of 0.9%, the first decline in one and a half year, after rising 3.9% in the first quarter. This means that output per worker fell and the economy is operating less efficiently because overall production is below its potential. Analysts say the good news in this could be that businesses may be forced to hire more employees if they have reached the limits of productivity from current employees.

Compensation per hour fell at an annual rate of 0.7% in the second quarter and was flat in the first three months of the year.

A gauge of consumer confidence showed a slip in August to 43.6 from 44.7 in July. A reading under 50 shows pessimism, over 50 is optimistic.

Taken together, the reports show signs that the economic recovery in the US seems to be losing momentum.

However, markets got their boost by the Fed’s report. At the end of its meeting on Tuesday, it reported that it would take a small step to help the economy. The central bank said it would use money from its investments in mortgage securities to buy government debt on a small scale. This would help bring down long-term interest rates on mortgages and corporate debt but wouldn’t have a very big impact. In addition, it reported that economic growth will be “more modest" than it had thought 7 weeks ago. Also, it kept interest rates unchanged in a range between 0% and 0.25%.

In world markets, both European indices fell and Asian markets also ended the day on negative note after a report showed Chinese imports slowed in July, increasing only 22.7% from a year earlier, compared to a 34.1% year-over-year jump the prior month.

In commodities, oil was down $1.23 to $80.25 while gold was up $3.70 to $1,206.30 an ounce.

In bonds, the yield on the 10-year note fell to 2.77% from 2.82% the day before.