A rash of bad news was badgering the U.S. economy Thursday, forcing financial markets to dismiss central bankers' attempts to build confidence among consumers and investors.
Oil prices were broaching $100 a barrel. Consumer spending slowed drastically in September. Foreclosures doubled for the last quarter.
Further rattling confidence, oil giant Exxon Mobil posted earnings that fell short of expectations; and a Wall Street brokerage cut its investment rating of Citigroup, putting into question whether the No. 1 U.S. bank will need to lower its dividend as well as whether the subprime mortgage crisis may claim more casualties.
Whew!
Perhaps it's no surprise that stocks were in a steep decline. The Dow Jones industrial average was down more than 225 points in late-morning trade.
The Federal Reserve on Wednesday sought to soothe the markets, businesses and consumers by lowering key interest rates that make it easier to borrow money. The action was supposed to be a boon to spark spending and stave off a recession.
The Fed is equally concerned about inflation as oil prices hover at record levels.
The price of oil rose to a record above $96 a barrel Thursday after a surprise drop in U.S. crude stockpiles. It was the second straight week that the U.S. Energy Information Administration reported a slide in oil inventories.
Fears of shortage as winter draws closer will jack up prices for home-heating fuels and at the pump where prices are nearing three bucks a gallon.
Overnight, the national average price of a gallon of gas rose 1.4 cents to $2.91, according to AAA and the Oil Price Information Service.
The rise in those prices strips many consumers of disposable income they would spend on discretionary items ranging from clothes to dining.
To a degree, that scenario has already begun to play.
The Commerce Department reported Thursday that consumers held back in September. Consumer spending grew 0.3 percent, the weakest performance in three months and a bit lower than the 0.4 percent increase that analysts were looking for. (Meanwhile, incomes grew by 0.4 percent, matching the August gain, and in line with analysts' forecasts.)
One reason consumers' spending is slowing is the increase in overall living costs, chiefly their homes. And more and more homeowners are coming up short there as well.
Foreclosures more than doubled in the third quarter, from the same time a year ago. Mortgage data firm RealtyTrac, Inc. said 446,726 homes nationwide were targeted by some sort of foreclosure activity – including notices of default, auction sale notices or bank repossessions — from July to September, up 100.1 percent from 223,233 properties in the year-ago period.
There was one foreclosure filing for every 196 households in the nation during the most recent quarter, RealtyTrac said.
The current figure was 33.9 percent higher than the 333,731 properties in foreclosure in the second quarter of this year.
From NPR and The Assoicated Press
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