published Friday, August 5th, 2011

Wall Street crackup hits home

Two weeks of losses reach nearly $2 billion locally


Chattanooga's biggest companies have shed nearly $2 billion in market value in the past two weeks.

• Unum Group, the Chattanooga-based disability insurer, is down 10.2 percent since July 21, or more than $800 million in market value

• Mohawk Industries, the Calhoun, Ga.-based carpetmaker, is down 16.1 percent, or more than $600 million in market value.

• CBL & Associates Properties Inc., a shopping center developer, is down 16.2 percent, or more than $440 million in market value.

• Astec Industries Inc., a paving equipment maker, is down 17.5 percent, or more than $150 million in market value.

Sources: New York Stock Exchange, Nasdaq Exchange

The bears on Wall Street have eaten nearly $2 billion of market value from Chattanooga's biggest companies in the past two weeks.

The stock sell-off in New York on Thursday -- the worst since the financial meltdown slammed Wall Street nearly three years go -- left many Chattanoogans confused, anxious or at least with less money in their savings or retirement accounts.

The stock values of Chattanooga's biggest publicly traded companies have dropped by double-digit percentages since July 21 when Congress was still haggling over how to raise the federal debt ceiling.

"There's a general feeling the world situation is getting worse," said Forrest Simmons, a vice president for Barclays Wealth in Atlanta. "We didn't really resolve much with the debt ceiling but got it lifted."

Simmons said the stock market plunge Thursday pushed the market into the official definition of a correction with average stock prices down by more than 10 percent in the past 10 trading days. But he doesn't believe investors are headed for a bear market in which stocks drop by more than 20 percent.

Nonetheless, some fear the stock market plunge could signal a more sluggish recovery or even a possible double-dip recession. With the paper value of their holdings down, consumers and businesses may be more cautious about spending.

George Vieth, an investment advisory representative for ING Financial Partners in Chattanooga, said investors are confused.

"There are a lot of moving parts that can be confusing to the average investor," he said. "It's important we communicate."

Investment counselors urge long-term investors not to worry too much about the changes in any single day.

Jon Dutton, an Edward Jones financial adviser in LaFayette, Ga., said his office has fielded calls from clients asking what's causing the market downturn, and his answer to them: Fear.

"We've reinforced to them that this isn't 2008," he said, noting then there was a financial meltdown and a severe recession. Dutton said there's a big difference in the financial and regulatory climate now.

Jim Campbell, founder of Campbell Asset Management in Chattanooga, said he sold a significant amount of bonds Thursday and bought so-called defensive stocks such as Pepsi and Kellogg's.

"People have to eat, drink, and snack," he said, adding the dividends for such stocks are better than treasury bond yields.

Campbell said he's bearish on retail, automotive and energy stocks or any company related to global growth.

"It's two markets," he said.

Scott Phillips, portfolio manager at Chattanooga-based Lauren Templeton Capital Management, saw the sharp drop in the S&P 500 as proof that "there's a lot of fear in the market."

After the debt ceiling debate, markets took notice of economic and employment growth figures that had either been sharply revised downward during the debate or had missed expectations, he said. "The market has really started to zero in on those issues, the new debt issues in Europe, and the potential recession here in the U.S.," Phillips said.

But Phillips noted that in the midst of the weak economic data, corporate earnings "have been performing really well." Mohawk Industries reported flat second-quarter earnings on Thursday, but quarterly profits from this spring were up from a year ago for Chattanooga's other biggest companies, including Unum Corp., CBL & Associates, Astec Industries, Miller Industries and Dixie Group.

"You have to undertake the discipline of buying when everyone else is selling," Phillips said of his firm's philosophy. "When stocks get cheap, as they currently are, that actually creates opportunities."

Reporter Ellis Smith contributed to this report.

about Mike Pare...

Mike Pare, the deputy Business editor at the Chattanooga Times Free Press, has worked at the paper for 27 years. In addition to editing, Mike also writes Business stories and covers Volkswagen, economic development and manufacturing in Chattanooga and the surrounding area. In the past he also has covered higher education. Mike, a native of Fort Lauderdale, Fla., received a bachelor’s degree in communications from Florida Atlantic University. he worked at the Rome News-Tribune before ...

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nucanuck said...

These bland responses fail to acknowledge the emerging mega-trend...the end of growth. The adjustment to zero or even negative growth will preclude debt as we have known it, and used it.

Cheap energy allowed a century of extreme growth, rapidly rising energy prices will have the reverse effect from here forward.

Conservation is the inescapeable coming new watchword.

August 5, 2011 at 9:19 a.m.
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