Stocks suffered their worst day of the year, with the Dow tumbling into negative territory for 2012, after a disappointing jobs report in addition to dismal data from China and Europe fueled fears over the health of the global economy.
Whether the stock selloff continues through the summer "really depends on the government," said Doug Roberts, managing partner at Channel Capital Research. "If [the Fed] starts making news about QE3, than you can start to see this [selloff] is going to be relatively short-lived."
The Dow Jones Industrial Average plunged 274.88 points, or 2.22 percent, to end at 12,118.57, led by H-P [HPQ Loading... () 
] and AmEx [AXP Loading... () ].
The S&P 500 tumbled 32.29 points, or 2.46 percent, to finish at 1,278.04. The Nasdaq plummeted 79.86 points, or 2.82 percent, to close at 2,747.48. Both the S&P and Nasdaq entered correction territory from their 2012 highs.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, surged more than 10 percent to close above 26.
For the week, the Dow dropped 2.70 percent, the S&P 500 declined 3.02 percent, and the Nasdaq erased 3.17 percent.
All 10 S&P sectors finished negative for the week, led by energy.
The U.S. added just 69,000 new jobs in May while the unemployment rate grew to 8.2 percent, fueling speculation that the Fed might be prompted to intervene with another round of quantitative easing. Economists polled by Reuters had expected nonfarm payrolls to increase 150,000 and the jobless rate to hold steady at 8.1 percent.
"It's painfully obvious the economic recovery in the U.S. isn't just slowing down, it's pulling up the emergency brake," said Todd Schoenberger, managing principal The BlackBay Group.
Also on the economic front, construction spending rose a less-than-expected 0.3 percent and the Institute for Supply Management's manufacturing index also came in light at 53.5—still in expansion territory but reflective of a slowdown.
"We think it is increasingly likely the Fed will announce another round of QE at the Aug. 1 or Sept. 13 meeting," Michelle Meyer, senior economist at Bank of America Merrill Lynch, told clients in a note. "The Fed will not sit idle as the economy slows." (Read More: Why More Fed Easing Might Not Help Much Now)
Bond yields found new historic depths, with the 10-year Treasury note yield dropping below 1.5 percent and the 30-year bond touching its all-time low, while energy prices hit three-year lows as well and metals including gold surged.
Adding to woes, China's slowdown worsened in May as its factories saw a further deterioration in demand at home and abroad. The darkening outlook was underlined by data showing the fourth monthly decline this year in exports from South Korea, as shipments to the United States, Europe and China all fell.
Oil prices fell to their lowest since October 2011, while gold surged more than 4 percent to trade above $1,620 an ounce, logging its biggest one-day gain in more than two years as investors rushed to the yellow metal as a safe-haven.
Gold mining stocks were sharply higher, with Barrick Gold [ABX Loading... () ] leading the way and Newmont Mining [NEM Loading... () ] topping the S&P 500 performers.
European shares finished sharply lower amid lingering fears over the debt-ridden economies of Greece and Spain.
This comes after Spain unveiled Thursday that almost 100 billion euros ($123.25 billion) had left the country in the first three months of the year and the head of the European Central Bank (ECB) lambasted its handling of Bankia, the nation's troubled lender.
Meanwhile, Facebook [FB Loading... () ] tumbled to finish in negative territory, plummeting nearly 27 percent from its market debut of $38 a share. The social networking giant posted the biggest two-week loss of any IPO deal worth over $1 billion since 1995.
Groupon [GRPN Loading... () ]
Beacon Federal Bancorp [BFED Loading... () ] was also a rare stock trading in positive territory, after the company said it will be acquired by Berkshire Hills Bancorp [BHLB Loading... () ] for $132 million.
And Hughes Telematics [HUTC Loading... () ] soared on news that Verizon [VZ Loading... () ] would buy the company for $612 million in cash, or $12 a share to beef up its enterprise business.
—By CNBC’s JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
On Tap Next Week:
MONDAY: Factory orders; Earnings from Dollar General
TUESDAY: ISM non-mfg index; earnings from Hovnanian
WEDNESDAY: Weekly mortgage apps, ECB announcement, productivity and costs, oil inventories, Fed's Beige Book, Fed's Lockhart speaks, Fed's Lockhart speaks, Fed Basel III vote
THURSDAY: Bank of England announcement, jobless claims, Bernanke speaks, quarterly services survey, Fed's Lockhart speaks, Fed's Kocherlakota speaks, consumer credit; Earnings from Lululemon Athletica, JM Smucker
FRIDAY: International trade, wholesale trade, Fed's Kocherlakota speaks, Chesapeake annual meeting
More From CNBC.com:
ePlus to Restate Financial Results for Prior Periods - Yahoo Finance
HERNDON, Va., May 31, 2012 (GLOBE NEWSWIRE) -- ePlus inc. (Nasdaq:PLUS - News) today announced that the Company will restate its consolidated financial statements for the fiscal years ended March 31, 2010 and 2011, and the quarterly financial statements for the three quarters ended June 30, September 30, and December 31, 2011 and all of the quarters in the fiscal year ended March 31, 2011. For the periods affected by the restatement, the Company's restated financial statements will report revenues from the sale of third party software assurance, maintenance and services on a net basis rather than on a gross basis, as previously reported. The Company expects that the correction of this error will have no effect on its previously reported earnings, earnings per share, or consolidated statements of cash flows. Additionally, the Company has identified an unrelated error in connection with lease revenue reported prior to 2010 that will have an immaterial effect on its previously reported consolidated balance sheets and consolidated statements of stockholders' equity.
In each fiscal year during the restatement period, the Company expects the effect of the gross vs. net revenue accounting change to decrease previously reported "sales of product and services" and "cost of sales, products and services." As a result of the reporting change to a net basis, the Company also expects gross profit to remain unchanged and gross margin to increase. The Company expects its financial results for the quarter ended March 31, 2012 to reflect similar revenue and cost of sales adjustments.
Presentation of Sales of Third Party Software Assurance, Maintenance and Services
During the preparation of its financial statements for the fiscal year ended March 31, 2012, and after discussions with Deloitte & Touche LLP, its independent registered public accounting firm, the Company reassessed the presentation of sales of third party software assurance, maintenance and services and, after giving further consideration with respect to gross vs. net reporting, concluded that these transactions should be presented on a net basis. The Company previously presented these transactions consistent with its revenue recognition policy, originally implemented during fiscal year 2006, on a gross basis, primarily as a result of the Company's determination that it was acting as a principal in these arrangements as the customer contracts are with ePlus and not with third party service providers. However, it has recently been determined that ePlus should be considered as an agent in these transactions because third party service providers are responsible for the day to day provision of services under these contracts. This change in the determination of that status results in a different accounting treatment of the revenue resulting from the sale of such third party software assurance, maintenance and services, requiring the revenue to be reported net of the associated cost of the underlying contracts with the third party service providers.
Under net sales recognition, the cost paid to a third party service provider is recorded as a reduction to sales of related products and services, resulting in net sales being equal to the gross profit on a transaction. The Company does not expect any changes to earnings before provision for income tax, net earnings, or net earnings per common share or consolidated statements of cash flows. In addition, the Company expects that the changes to the consolidated balance sheets and consolidated statements of stockholders' equity will be immaterial. The restatement will not have any impact on the Company's underlying agreements with, or obligations to, its customers and third party service providers, nor will the restatement affect the amount that the Company invoices its customers.
Restatement
As a result of the foregoing, on May 24, 2012, the Audit Committee of the Company's Board of Directors concluded, in consultation with and upon the recommendation of the Company's management, and after consulting with outside advisors, that investors should no longer rely upon the Company's previously issued financial statements and related audit reports of its independent registered public accounting firm, Deloitte & Touche LLP, for the restatement period identified above. The Company expects to file restated financial statements as described below to correct the Company's presentation of sales of third party software assurance, maintenance and services. The Audit Committee and management have discussed these matters with the Company's independent registered public accounting firm.
Until the restatement is complete, the expected effects of the restatement are subject to change. It is possible that additional issues may be identified during the course of the review and audit processes. Any additional items that may be identified during the completion of the review and audit process could be material to the Company's financial condition and results of operations for the years ended March 31, 2010 and 2011, and each of the three quarters ended December 31, 2011 and each of the quarters in fiscal year ended March 31, 2011.
Management is continuing to assess the effect of the restatement on the Company's internal control over financial reporting and its disclosure controls and procedures. Management will report its conclusion on internal control over financial reporting and disclosure controls and procedures upon completion of the restatement process.
As soon as practicable, the Company intends to file its Annual Report on Form 10-K for the year ended March 31, 2012, which will include restated audited financial statements for the years ended March 31, 2010 and 2011, for each of the three quarters ended December 31, 2011 and for each of the quarters in the fiscal year ended March 31, 2011. The Company will also include in the Form 10-K restated selected financial data for the years ended March 31, 2008 through 2011.
About ePlus inc.
ePlus is a leading provider of technology solutions. ePlus enables organizations to optimize their IT infrastructure and supply chain processes by delivering world-class IT products from top manufacturers, managed and professional services, flexible lease financing, proprietary software, and patented business methods and systems. Founded in 1990, ePlus has more than 800 associates serving federal, state, municipal, and commercial customers nationally. The Company is headquartered in Herndon, VA. For more information, visit http://www.eplus.com/, call 888-482-1122, or email info@eplus.com.
ePlus(R) and ePlus products referenced herein are either registered trademarks or trademarks of ePlus inc. in the United States and/or other countries. The names of other companies and products mentioned herein may be the trademarks of their respective owners.
Forward-Looking Statements
Statements in this press release that are not historical facts may be deemed to be "forward-looking statements" including the expected effects of the restatement. Actual and anticipated future results may vary materially due to certain risks and uncertainties, including, without limitation, unanticipated accounting issues or audit issues regarding the financial data for the periods to be restated or adjusted; inability of the Company or its independent registered public accounting firm to confirm relevant information or data; unanticipated issues that could prevent or delay the Company's independent registered public accounting firm from concluding the audit or requiring additional efforts, procedures or review; the Company's ability to design, improve or remediate, as necessary, internal controls to address identified issues; possible adverse effects resulting from the recent financial crisis in the credit markets and general slowdown of the U.S. economy such as our current and potential customers delaying or reducing technology purchases, increasing credit risk associated with our customers and vendors, reduction of vendor incentive programs, the possibility of additional goodwill impairment charges, and restrictions on our access to capital necessary to fund our operations; the demand for and acceptance of, our products and services; our ability to adapt our services to meet changes in market developments; our ability to adapt to changes in the IT industry.
CANADA STOCKS-TSX sinks as growth fears intensify - Reuters UK
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German Stocks Fall as China Output Slows; BMW Declines - Bloomberg
German stocks declined for a third day as manufacturing growth slowed in China, unemployment in the single currency area reached a record and American employers in May added the fewest workers in a year.
Bayerische Motoren Werke AG (BMW) dropped 3.9 percent after the world’s largest luxury carmaker said Germany’s car market won’t grow in 2012. Infineon Technologies AG slid 5.7 percent. MAN SE jumped 2.2 percent after its parent company, Volkswagen AG (VOW), said it was forging a truckmaking alliance.
The DAX Index (DAX) dropped 3.4 percent to 6,050.29 at the close of trade in Frankfurt. The benchmark gauge lost 7.4 percent in May amid growing concern that Greece will be forced to leave the euro area and Spanish banks will seek bailouts. The broader HDAX Index also retreated 3.3 percent.
“The weak data from China is one of the main themes of the moment,” said Mikkel Kirkegaard Petersen, a senior equity specialist at Nordea Private Bank in Copenhagen. “Today’s numbers have not made us more confident and investors are selling because of this. The biggest part of the German car industry’s growth comes from China and they will get hammered if China growth recedes.”
China’s purchasing managers’ index expanded at the weakest pace since December last month, falling to 50.4 from 53.3 in April, the statistics bureau and logistics federation said today in Beijing. This compares with the 52 median estimate in a Bloomberg News survey of 27 economists. A reading above 50 indicates expansion.
A separate gauge from HSBC Holdings Plc and Markit Economics showed a seventh straight contraction, the longest since the global financial crisis.
Euro-Area Unemployment
Euro-area unemployment reached the highest on record as a deepening economic slump and budget cuts prompted companies from Spain to Italy to cut jobs. The jobless rate was at 11 percent in April and March, the European Union’s statistics office in Luxembourg said today. That’s the highest since the data series started in 1995 and in line with the median forecast of 28 economists in a Bloomberg survey. The March figure was revised up to 11 percent from 10.9 percent.
Euro-region manufacturing output contracted for a 10th month in May as the economy struggled to regain strength amid the deepening debt crisis.
A gauge of manufacturing in the 17-nation euro area fell to 45.1 from 45.9 in April, London-based Markit Economics said today. That’s the lowest since mid-2009. It had previously reported the May output indicator at 45. A reading below 50 indicates contraction.
U.S. Hiring
Employers in the world’s biggest economy added the smallest number of workers in a year in May and the unemployment rate unexpectedly increased as job-seekers re-entered the workforce, further evidence that the labor-market recovery is stalling.
Payrolls climbed by 69,000 last month, less than the most- pessimistic forecast in a Bloomberg News survey, after a revised 77,000 gain in April that was smaller than initially estimated, U.S. Labor Department figures showed today in Washington. The median estimate called for a 150,000 May advance. The jobless rate rose to 8.2 percent from 8.1 percent, while hours worked declined.
Manufacturing in the U.S. grew at a slower pace in May as factories tempered production and pared inventories in response to weakness in the global economy.
The Institute for Supply Management’s factory index fell to 53.5 after reaching a 10-month high of 54.8 in April, the Tempe, Arizona-based group reported today. Readings greater than 50 signal growth. The median projection of economists surveyed by Bloomberg News called for a decrease to 53.8 in May.
Carmakers Fall
BMW retreated 3.9 percent to 58.72 euros after it said Germany’s car market won’t grow in 2012 following a jump in 2011. “Last year was an exceptionally positive year for us in Germany,” said Karsten Engel, the carmaker’s head of sales and marketing in Germany.
Volkswagen dropped 4.1 percent to 123.75 euros. Europe’s largest carmaker will appoint a new trucks chief, add an executive to oversee China and replace three members of Audi’s board as part of a management shakeup to push forward with growth plans, according to people familiar with the matter.
Daimler AG (DAI) fell 5.1 percent to 35.52 euros after it was cut from sell to buy at Bankhaus Metzler in Frankfurt by equity analyst Juergen Pieper.
Infineon (IFX), Europe’s second-largest semiconductor maker, declined 5.7 percent to 6.03 euros, its lowest price this year.
Deutsche Bank Drops
Deutsche Bank AG (DBK) fell 4.2 percent to 27.15 euros. Germany’s largest lender borrowed 9 billion euros ($11.1 billion) from the European Central Bank through its Spanish and Italian units after saying it took only “a small amount” in a second round of emergency funding.
Deutsche Bank SA Espanola, the lender’s Spanish unit, took 5.5 billion euros and Deutsche Bank SpA, the Italian arm, borrowed 3.5 billion euros in the ECB’s second longer-term refinancing operation in February, according to annual reports filed by the two divisions.
Deutsche Bank said it named a new 15-member executive committee for its investment bank after Anshu Jain, the sole head of the unit since 2010, moved up to become co-chief executive officer with Germany head Juergen Fitschen.
Commerzbank AG (CBK), Germany’s second-biggest lender, fell 2 percent to 1.31 euros.
MAN rose 2.2 percent to 79.07 euros after Volkswagen’s decision to strengthen ties with the truckmaker and Scania.
“MAN has been driven up today by the news that VW will make crucial decisions in the personnel for the integrated commercial vehicle group,” said Helena Wuestenfeld, an analyst at Bankhaus Metzler in Frankfurt.
Scania AB Chief Executive Officer Leif Oestling will join Volkswagen’s management board to help coordinate synergies between the truckmaking operations.
To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
Budget austerity gives financial managers a chance to shine - GovExec.com
Defense Department leaders preparing for historic budget cuts should tap the expertise of their financial management executives, who see the current challenges as their moment to “step up to the plate and shine,” stated a new survey conducted by the American Society of Military Comptrollers and Grant Thornton LLP.
The 10th annual survey, released Thursday, summarizes responses from 742 uniformed and civilian defense financial leaders and employees on their role in helping the Pentagon prepare for new military conflicts and a possible budget sequester, and adjusting to a “mind-set of less.”
With top Defense leaders preoccupied with macro issues, “now is truly a time for all [financial management] professionals to assume a leadership role in meeting the challenges of significantly reduced resources in an uncertain and dangerous world,” an analysis of the survey results said.
“We are seeing an increased need for the strategic financial management professional who combines technical finance knowledge with strong analytics and sound operational knowledge,” Al Tucker, executive director of the controllers association, said in a statement. “These professionals can craft budget-cutting solutions that assess and protect priority programs while still generating funds for investments required by the president’s new policy guidance.”
Retired Vice Adm. Lewis Crenshaw, a principal at Grant Thornton and the primary interviewer for the survey, said, “a sluggish U.S. economy, the return of troops from Iraq and Afghanistan, the specter of sequester, a gridlocked election-year Congress, and a rethinking of Defense strategy have combined to create a ‘perfect financial management storm.’ ” If the right people are in place, he added, “the financial management corps is ready to step up and shine.”
The survey showed that about two-thirds of financial managers are optimistic about their ability to bring cultural change to reflect the new austerity. But “inertia, resistance to change and entrenched interests that want to maintain the status quo all can work against these efforts,” the survey report said. The most important skills required of modern financial managers are critical thinking, analytical prowess, understanding the operational context of the programs they support, and creating and using performance measures, respondents said.
The survey showed a gap between top executives and field managers on some key questions. Asked whether pay and hiring freezes are having a significant impact on the workforce, 77 percent of executives said no, but only 39 percent of lower-level managers agreed.
Similarly, the goal of achieving auditable financial statements -- a challenge that has vexed the Pentagon for nearly two decades -- is a higher priority for top-level executives than for field managers.
The financial managers were asked which of several approaches top defense leaders likely would take. Options included shifting financial management tasks to nonspecialists; requiring managers to take a 5 percent to 10 percent across-the-board budget cut; negotiating to reduce the number of reports and services required; and outsourcing financial management operations. None of these choices is realistic, the majority of respondents said, but the most likely is an across-the-board cut to program budgets.
Jurors say evidence fell short in Edwards' campaign money trial - Reuters UK
WINSTON-SALEM, North Carolina |
WINSTON-SALEM, North Carolina (Reuters) - Three jurors who acquitted former U.S. Senator John Edwards on one count of taking illegal campaign money for his failed 2008 presidential bid said on Friday there was not enough evidence to convict him of five related federal charges.
A mistrial was declared on those five counts on Thursday after the 12-member jury in Greensboro, North Carolina, said it was deadlocked on its ninth day of deliberation.
Three of the jurors, including the foreman, said on NBC's "Today" show they believed Edwards was guilty of at least some of the charges brought against him by the government.
Edwards, 58, was accused of masterminding a plot to funnel more than $900,000 from two wealthy supporters to conceal his pregnant mistress from his cancer-stricken wife and voters during his bid to win the Democratic nomination four years ago.
"I think he definitely had some knowledge of the money, where the money was going," said juror Ladonna Foster.
"But he was just smart enough to hide it," said juror Cindy Aquaro, later adding, "The evidence just was not there for us to prove guilt."
Jury foreman David Recchion said the government's case took a hit due to the lack of credibility of its chief witness, ex-campaign aide Andrew Young, who once falsely claimed paternity of the child Edwards had fathered with Rielle Hunter.
The defense showed that Young made inconsistent statements, benefited financially from a tell-all book about Edwards' affair and pocketed more than $1 million from the cover-up.
"I think unfortunately that was probably the key part of the miss for the prosecution," Recchion said of Young's testimony.
The jurors said emotions sometimes ran high as the deliberations dragged out, but they started each day with calmness and tried to put their personal feelings about Edwards' character aside.
"We actually prayed together as a group," Recchion said.
A law enforcement source said late Thursday that Justice Department prosecutors were unlikely to retry Edwards, but no final decision had been made.
Foster said she thought the government should try again, while Aquaro said she did not think the first trial was money well spent.
But juror Recchion said the campaign finance law itself was flawed. "I think there needs to be some change in campaign finance law before you go through this process, and kind of nailing down what really is and what really isn't a campaign contribution."
(Reporting by Colleen Jenkins; Editing by Jackie Frank)
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