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Local stocks get hammered in third quarter

Rochester Business Journal
October 14, 2011

Local stocks trading on the New York Stock Exchange lost 19 percent of their value in the third quarter, and those on the Nasdaq and other boards declined 20 percent as the broader market concluded its worst performance since the onset of the 2008 recession.
 
The Standard & Poor's 500-stock index tumbled 14 percent in the three months ending Sept. 30, the largest since a 23 percent drop in the fourth quarter 2008. The Dow Jones Industrial Average fell 12 percent.
 
The turbulence, prompted in part by the financial crisis in Europe and political brinksmanship in Washington, D.C., has revived fears a second recession may be looming.
 
"Before the recent selloff, the markets had run up returns of over 100 percent since bottoming in 2009," said Stefan Astheimer, strategist with Howe and Rusling Inc. in Rochester. "What's more, the S&P was within 15 percent of its all-time, pre-crisis highs.
 
"While we haven't entered a double-dip recession yet, the recovery has been tenuous and the economy has not yet worked through all the issues it has faced."
 
Europe's sovereign debt crisis-particularly in Greece-and the threat of a global slowdown, coupled with high unemployment in the United States, have eclipsed modestly improving economic reports.
 
"The market hasn't seen the recovery in employment we hoped for and has not been impressed by the political responses of both the Democrats and Republicans," Astheimer said.
 
"With all this concern, and with 2008 still fresh in everyone's minds, the market has responded very skittishly to the problems in Europe and poor releases here."
 
Only three of 49 NYSE stocks with a local presence posted quarterly gains. Macy's Inc. was up 11 percent, Target Corp. was up 2 percent, and IBM Corp. was up 1 percent.
 
Five of 26 local stocks on the Nasdaq, American Stock Exchange and the over-the-counter bulletin board were in positive territory, led by Torvec Inc. at 47 percent, Document Security Systems Inc. at 14 percent and Paetec Holding Corp. at 10 percent.
 
Four local stocks were flat for the quarter.
 
Eastman Kodak Co., beset by reports as the quarter ended that it was contemplating bankruptcy, plummeted 54 percent in the quarter, to $1.39 a share. It is down 67 percent over the last 12 months.
 
"The market has been increasingly concerned that by drawing down its credit line and hiring restructuring firm Jones Day, Kodak is considering bankruptcy," Astheimer said.
 
"Kodak maintains it is not planning on entering bankruptcy, and there is still value in Kodak's patent portfolio and brand. There is hope that Kodak will find a suitable buyer, or a brilliant visionary to take the company private and turn it around."
 
Payroll-processing firm Paychex Inc., often cited as a bellwether of employment trends, declined 16 percent in the quarter.
 
"Paychex remains an extremely well-run and profitable company," Astheimer said. "However, the market feels that it will be challenging for the company to continue to deliver growth as long as interest rates remain low and unemployment remains high."


10/14/11 (c) 2011 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail service@rbj.net.


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