(RTTNews) - After turning in a strong performance last week, stocks are posting steep losses in mid-afternoon trading on Monday. Nonetheless, the major averages have moved roughly sideways recently, as traders digest comments from Federal Reserve Chairman Bernanke.

In a speech, Bernanke said that there was only so much the central bank can do with further interest rate reductions, but he stressed that the Fed could still use its other tools to help support financial markets and stimulate the economy.

Speaking at an event hosted by the Greater Austin Chamber of Commerce in Austin, Texas, Bernanke said that financial markets are better off for the moves authorities have taken lately, but he noted that a total fix has not come yet.

He also stated that the economy would likely remain weak for some time.

On the economic front, The ISM’s index of activity in the manufacturing sector fell to 36.2 in November from 38.9 in October, with a reading below 50 indicating a contraction in the sector. With the decrease, the index fell to its lowest level since May of 1982.

“Global manufacturing is in its worst recession since at least 1980,” said Chris Low, chief economist at FTN Financial. “In the U.S., the recent strength of the dollar is a problem, but weak international demand and terrible domestic car sales are even bigger issues.”

Separately, the Commerce Department released its report on construction spending in the month of October, showing that spending fell by more than expected amid a notable decrease in spending on residential construction.

In an interview with RTT News, Peter Cardillo, chief market economist at Avalon Partners discussed the market’s sharp downturn on Monday, saying that it is “spooked” by disappointing global economic data and has great fear of deflation.

At the same time, Cardillo said he thinks we will see a Santa Clause rally despite very ugly jobs data and consumers scaling back in a big way. However, he advised investors to not be “over-enthused,” because outside of another 5 to 10 percent bounce, it’s going to be a trading range.

As mentioned above, the major averages have been rangebound in recent trading, stuck near their worst levels of the day. The Dow is currently down 440.85 at 8,388.19, the Nasdaq is down 94.66 at 1,440.91 and the S&P 500 is down 52.67 at 843.57.

Dow Components

All thirty of the Dow components are currently trading in negative territory, contributing to the steep loss by the blue chip index, with most of the components posting substantial losses.

One of the most notable losses comes from Home Depot (HD), which is currently down 7.1 percent on the day, pulling back off the one-month closing high it set on Friday.

Massive losses were also posted by Citigroup (C), American Express (AXP), and JP Morgan (JPM). Shares of Citigroup are currently down 16.4 percent, while shares of American Express are down 12.1 percent and shares of JP Morgan are down 10.8 percent.

Dow component Johnson & Johnson (JNJ) is also in focus after the healthcare products giant said that it has agreed to acquire medical products supplier Mentor Corp. (MNT) for $1.07 billion in cash. J&J will pay $31 for each shares of Mentor, nearly double Mentor’s closing price on Friday.

Sector News

With the price of gold closing down by more than $40 an ounce, gold stocks are posting particularly seep losses in mid-afternoon trading.

Led by steep losses by Hecla Mining Co. (HL) and Golden Star Resources, Ltd. (GSS), the Amex Gold Bugs Index is down 10.2 percent, pulling back off the month and a half closing high that it set on Friday.

Decreases in the price of other commodities are also forcing the broader markets lower as resource stocks react negatively. The Philadelphia Oil Service Index is down 12.6 percent, while the Amex Steel Index and Amex Natural Gas Index are down 11 percent and 8.4 percent, respectively.

Brokerage, banking, housing, and airline stocks are posting steep losses. The weakness among financial stocks reflects continued concerns about the outlook for the financial industry.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region closed mixed on Monday, with Japan’s Nikkei 225 Index posting a loss of 1.4 percent by the end of the day, while Hong Kong’s Hang Seng Index closed 1.6 percent higher.

Meanwhile, the major European markets ended the day sharply lower, at their worst levels of the day. The French CAC 40 Index and the German DAX Index closed down 5.6 percent and 5.9 percent, respectively, while the U.K.’s FTSE 100 Index posted a loss of 5.2 percent.

In the bond market, treasuries have seen some further upside in recent trading, rising to new highs for the session. Subsequently, the yield on the benchmark ten-year note is currently down 26.6 basis points at 2.691 percent.

For comments and feedback: contact editorial@rttnews.com

Copyright(c) 2008 RealTimeTraders.com, Inc. All Rights Reserved

Posted in Categories: Economy, Eurozone, Japan, Releases, USA.

Subscribe by RSS Subscribe by Email  Email This Post To A Friend