Ebola worries fan flight
A trio of weak data, showing a pullback in consumer spending, softer manufacturing and falling inflation, fueled selling Wednesday in an already jittery stock market on fears that the U.S. economy cannot hold the line against a global slowdown.
Economists immediately slashed their U.S. GDP growth forecast for the third quarter. Barclays and Credit Suisse said tracking GDP growth fell to 3 percent from 3.3 percent.
The Dow Jones Industrial Average plunged 350 points minutes after opening. The S&P 500 index and the Nasdaq also opened lower. Before the opening bell, the September retail sales report showed the first decline in eight months. Sales were down 0.3 percent, in large part due to fewer vehicle purchases and a decline in gasoline. Inflation data also disappointed with the producer-price index for final demand decreasing 0.1 percent, versus expectations for a 0.1 percent increase.
'I think immediately you have to cut back (GDP growth expectations) a half percentage point to 2.5 based on retail sales,' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi. 'The consumer looks pretty dead in the water here. If it does reach 3.0 it's going to be due to the fact that goods are stacking up on store shelves due to an inventory overhang.'
The data also confirmed some traders' views that the Fed will not move to hike interest rates in the middle of next year, as expected by many Wall Street economists. The 10-year Treasury yield touched 2.0 percent in a slide that paralleled a slump in German bund yields.
'The bond market is doing what it does best. It's speculating on a future which may not happen. We got the double whammy today. We got some deflation fear. We got the consumers not only slowing purchases but they actually cut their purchases,' Rupkey said.
Read More Weak producer prices, factories slow down
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