By MATTHEW CRAFT
NEW YORK — Mounting signs of weakness in the global economy and a poor start to the holiday shopping season knocked the stock market lower Monday.
Earlier sales, a shift to online shopping and stagnant wages meant fewer Americans showed up to stores over the Thanksgiving weekend, the National Retail Federation said Sunday. The trade group estimated that total spending for the four days totaled $50.9 billion, down 11 percent from last year.
New reports of slowing manufacturing in China as well as in the three largest economies that use the European currency — Germany, France and Italy — also gave investors little reason to cheer.
The Standard Poor’s 500 index (^GPSC) fell 14.12 points, or 0.7 percent, to close at 2,053.44. The losses were widespread: General Electric (GE) and other industrial companies led eight of the ten sectors in the index down.
It was a weak start to what has been the stock market’s best month on average. Since 1950, the SP 500 has ended December with a typical gain of 1.7 percent, according to the “Stock Trader’s Almanac.” But after a strong 11 percent run this year, the market looks relatively expensive. The SP 500 index trades at 17.6 times its profits over the past 12 months, well above the long-term average.
Peter Cardillo, chief market economist at Rockwell Global Capital, said more reports of slow economic growth around the world and falling oil prices could drive the market down in the coming weeks. But he thinks any setback will likely prove temporary. “Maybe the weakness in the global economy will take some of the starch out of our economy,” he said. “It probably will, just not so much that it really hurts corporate earnings.”
A survey by HSBC (HSBC) showed Chinese manufacturing activity lost steam in November, adding to signs of an economic slowdown. HSBC said its purchasing managers’ index edged down to 50 from 50.4 the previous month. On the index’s 100-point scale, numbers below 50 indicate contraction. China’s economic growth slowed to a five-year low of 7.3 percent in the latest quarter.
“The November PMIs confirm that growth in China’s industry remains under downward pressure,” Louis Kuijs of Royal Bank of Scotland wrote in a report to investors.
Asia, Europe Markets Move Lower
In Asia, Hong Kong’s Hang Seng index plunged 2.6 percent, while the Shanghai Composite Index slipped 0.1 percent. Japan’s benchmark stock index Nikkei 225 added 0.8 percent.
Major stock markets in Europe closed with slight losses. Germany’s DAX sank 0.2 percent, and France’s CAC 40 dropped 0.3 percent. Britain’s FTSE 100 slid 1 percent. Russia’s RTS index lost 1.6 percent.
Back in the U.S., DreamWorks Animation (DWA) slumped after its latest movie, “Penguins of Madagascar,” had a weaker box-office opening over the Thanksgiving weekend than analysts had expected. The sequel to its popular “Madagascar” movie took second place to the newest installment of “The Hunger Games” series. DreamWorks’ stock plunged $1.33, or 6 percent, to $22.51.
In the bond market, the yield on the 10-year Treasury note rose to 2.23 percent from 2.16 percent late Friday. High demand for U.S. government bonds has kept yields low.
Precious metals surged. Gold jumped $42.60 to settle at $1,218.10 an ounce, while silver surged $1.14 to $16.69 an ounce. Copper rose five cents to $2.90 a pound.
Oil posted its biggest percentage gain in more than two years, stemming a rout that had knocked about $40 off the price of a barrel of crude since June. Analysts still expect oil prices to remain weak given OPEC’s decision last week to maintain its current production targets. That, combined with rising production in the U.S., has created an oversupplied oil market. Benchmark U.S. crude jumped $2.85, or 4 percent, to close at an even $69 a barrel on the New York Mercantile Exchange.
In other trading on the NYMEX:
- Wholesale gasoline rose 5 cents to $1.88 a gallon
- Heating oil rose 5 cents to $2.21 a gallon.
- Natural gas fell 8 cents to $4.01 per 1,000 cubic feet
–AP Business Writer Joe McDonald contributed from Beijing.
What to watch Tuesday:
- Automakers report U.S. vehicle sales for November.
- The Department of Commerce reports construction spending data for October at 10 a.m. Eastern time.
For 2014, you’re allowed to contribute up to $17,500 to your 401(k). (If you’re 50 and over, that limit increases to $23,000.) This is the maximum you’re able to save per year and still defer paying income tax on that money.
Since 401(k) contributions must be made through payroll deductions, talk to your company’s payroll department about adjusting your December contribution or adding a lump-sum amount from your holiday bonus when you receive it. Also, chat with your human resource department to see if it will let you retroactively earmark contributions made prior to April 15, 2015 for the 2014 tax year.
Do you have a flexible spending account, or FSA, at work? Check the detail of your company’s policy; many are “use it or lose it,” meaning if you don’t use the full amount in your FSA by year’s end, that money will not roll over.
New federal laws permit employers to let their workers roll over a maximum of $500, but it’s the employers choice whether or not to allow this rollover. Also, some employers give their workers a grace period until March of the following year to use the prior year funds, while other employers require that the funds are used by Dec 31. Check with your HR department to learn your employers’ rules.
Remember that FSA funds can be used for a lot more than just prescriptions and co-pays. If you have money you need to spend before it’s gone, you may also be able to use it for things like dental work, glasses or contact lenses, and even some qualified over-the-counter medicine and supplies.
Secure some additional tax deductions for 2014 by donating to a charitable cause. As long as you itemize your donations, you can claim everything from cash donations to goods to used vehicle donations. You can even give some of your stock to charity, thus avoiding capital gains tax.
Just be sure to get a signed and dated receipt from the charity, noting the amount of your contribution — especially if you’re donating goods instead of cash. As an added precaution, take photographs of any high-value donations (over $250).
You can give up to $14,000 to individuals per year without needing to file a gift tax return. If you’re married, you and your spouse can each bequeath gifts of $14,000 to an individual without triggering a taxable event. If you decide to give a major financial gift to your children, talk to your kids first about strong money-management skills. Here’s a free guide to help to talk to your kids about money.
Giving a little bit each year can also help reduce your overall estate tax burden (although the estate tax exemption is $5.34 million in 2014, which means few taxpayers will need to worry about this).