Trader Talk

More Global Slowdown Fears Spook Markets

Bob Pisani is off; this post was written by CNBC producer Robert Hum.

It’s not all about Greece and Europe – global slowdown worries are also clouding the situation for stocks.” – Remember that from yesterday morning? It’s clearly holding true again today.

After the Fed’s downbeat language on the global economy yesterday, there’s more evidence of the economic slowdown today – and that’s putting much pressure on markets around the world. China’s Flash PMI showed contraction for the third straight month, falling to 49.4, while the Eurozone saw contraction for the first time since July 2009, with its PMI sliding to 48.4. Also troublesome was lower-than-expected factory orders in Europe.

In addition, a couple of companies cited how the global slowdown is impacting their businesses:

a) FedEx beat Q1 estimates by a penny, but noted express shipping volumes in the latest quarter were down – falling 3 percent in the U.S. and down 4 percent internationally – due to “slowing global economic growth.” CFO Alan Graf noted that “the U.S. and global economy grew at a slower rate than we anticipated during the quarter.”

Shares are dropping 6 percent after the shipper also cut its 2012 outlook to $6.25-$6.75 vs. $6.36 consensus. Q2 guidance is fairly conservative at $1.40-$1.60 vs. $1.56 consensus.

b) CarMax  falls 7 percent after earnings missed estimates ($0.49 vs. $0.51 consensus) on disappointing car sales. Used vehicle comps fell 2 percent, far disappointing expectations for growth in the quarter. Meanwhile new vehicle comps fell 9 percent. The auto dealer cited “the recent economic slowdown and further reductions in consumer confidence levels” for the weakness in traffic.

Amid the latest wave of economic concerns, the Dow Industrials and the S&P 500 have erased all of last week’s gains…and more. New highs abound too – and stretching beyond the financials. Big cyclical names like material stocks including BHP Billiton , Rio Tinto , Freeport-McMoRan , U.S. Steel and industrials including Eaton , Whirlpool , Stanley Black & Decker , 3M are all hitting 52-week lows. In fact, the number of new lows at the NYSE have hit their highest levels since the markets hit their lows early last month.

Meanwhile, commodity stocks are the day’s biggest laggards, as commodity prices slide on the global slowdown fears. Copper falls 6 percent and hits a new 52-week low (it’s now down 21 percent (!) from the end of July). Elsewhere, silver drops 9 percent to a 2-month low, crude oil falls 5 percent to below $82, and even gold is no safe haven – falling over 4 percent on the day.


United Technologies formally agreed to buy Goodrich after much speculation over the past week. The deal values Goodrich at $18.5 billion, inclusive of about $1.9 billion in debt. UTX will pay Goodrich shareholders $127.50/share, a 47 premium from last Thursday’s close – prior to discussions of the deal being reported. On the news, Goodrich rises 10 percent – one of the few bright stock moves on the day.

Mosaic falls 3 percent after announcing a secondary offering of 18 million shares. The fertilizer company also learned that S&P will be adding the stock to the S&P 500 on Friday, replacing National Semiconductor , which is being acquired by Texas Instruments .

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