U.S. Markets Fall On Economic Data, GE Debt Outlook

December 18, 2008 4:43 p.m. EST

New York, NY (AHN) - U.S. markets failed to hold early gains as a weak Philadelphia Fed Index and negative leading indicators for November weighed on stocks. Selling pressure intensified when Standard & Poor's lowered GE's credit outlook from stable to negative.

The Dow Jones Industrial average fell 219 points or 2.5 percent. 25 of 30 Dow components finished Thursday lower. General Motors was the largest Dow laggard, down 16.2 percent after the White House said an "orderly bankruptcy" may be in order for the automakers.

General Electric also weighed on the Dow, down 8.2 percent after Standard & Poor's downgraded the company's credit outlook to negative. The credit rating agency still maintains its triple-A rating on GE debt, but said it now has a one in three chance of being downgraded.

The S&P 500 shed 19 points or 2.1 percent. The energy sector, down 6 percent and materials sector, down 4 percent were the main laggards.

Tech held up better on a relative basis with the Nasdaq Composite falling 27 points or 1.7 percent. The semiconductor stocks weighed most on tech with the index falling 5.5 percent.

MEMC Electronic Materials sparked the decline in chip stocks after lowering its fourth quarter earnings outlook for the second time, citing slowing demand.

Crude oil fell to prices not seen since June 2004, losing $3.32 a barrel to settle at $36.74.

On the economic front, the Labor Department said initial unemployment claims for the week ending Dec. 13 were 554,000, less than the 558,000 economists expected. However, continuing claims remain near 26-year highs at 4.38 million.

The Philadelphia Fed Manufacturing Index for December had a negative reading of 32.9, better than the negative 40 economists expected. However, the negative reading still shows contracting in the manufacturing sector.

November leading economic indicators declined 0.4 percent, in-line with expectations.

In corporate news, FedEx posted better than expected quarterly earnings due to cost cutting measures as revenue remained relatively flat. The company did not offer third quarter guidance due to the uncertain economic climate.

Friday's session will see earnings results from CarMax Inc. and Darden Restaurants.