Today: Wall street dips after a strong week thanks to weak manufacturing numbers; and Facebook faces a double test of its privacy practices.
Wall Street falls as 'fiscal cliff' reigns over all
Wall Street dipped slightly Monday as manufacturing hit its lowest point since just after the end of the Great Recession and wrangling over the "fiscal cliff" continued, though some struggling technology stocks received a jolt.
After strong gains last week, all three major U.S. indexes declined Monday by at least 0.3 percent after the Institute of Supply Management reported a sharp decline in manufacturing activity in November. The important economic indicator came in at the lowest mark since July 2009 at 49.5, a gauge that indicates manufacturing activity actually declined.
While the effects of Hurricane Sandy, which ravaged the East Coast in November, could be a factor, most economists believe companies are slowing their activity while waiting to see the results of the current debate on the "fiscal cliff," a combination of tax hikes and spending cuts that will take place at the end of the year of Congress and the White House do not pass a different plan.
"The fiscal cliff concerns are actually affecting decision making at the business level," Andres Garcia-Amaya, global market strategist at JPMorgan Chase's mutual funds unit, told Bloomberg News.
Politicians made slight headway in their battle Monday, but not enough to encourage investors that the issue would be settled in time. Republicans offered their plan, but it did not include any tax increases on upper income earners, which President Barack Obama has said must be included. Obama did not give an official response to the offer.
While manufacturing fell, consumer sentiment continued to be positive, as carmakers reported Monday that sales in November were robust. In another result that could have been affected by Sandy, which wrecked cars up and down the coast, automobiles may have sold at the highest rate since March 2008, according to preliminary calculations.
Still, concerns about the fiscal cliff were prevalent in the automotive sector, as well.
"Exactly how much growth we can expect next year will depend in part on how Congress and the president resolve the fiscal cliff issue," GM U.S. sales chief Kurt McNeil said. "Markets and consumers hate uncertainty."
While stocks fell, two companies in the beleaguered personal-computer industry managed strong gains. Dell, the No. 2 PC maker in the U.S. behind Hewlett-Packard (HPQ), increased 4.4 percent as Goldman Sachs increased its rating of the stock from "Sell" to "Buy," and said the Texas company was ripe for a leveraged buyout.
Chip companies have been hit especially hard by the PC downfall, with IHS reporting Monday that the global semiconductor market will drop almost 3 percent this year, and Sunnyvale's Advanced Micro Devices has suffered on Wall Street. However, AMD managed another large gain on Monday of 7.3 percent, the largest percentage increase of any stock in the Standard & Poor's 500. The struggling company has now seen its shares jump 25.5 percent in the past four trading sessions, leading Forbes writer Eric Savitz to ask readers to help him figure out why the company's stock is surging.
Facebook privacy practices put to the test
Facebook stock fell back Monday after the end of the Menlo Park company's symbiotic relationship with San Francisco social-gaming Zynga only hurt the latter on Friday. However, the company now faces a double test of its users' wariness about its privacy standards, as it opened up a vote on new rules while pushing a service that some advocates feel is worrisome.
A user referendum opened Monday that would change Facebook's privacy policies, including doing away with the exact type of user vote that will decide the current changes. The system, instituted when Facebook was much smaller, dictates that at least 30 percent of the social network's users must vote in the poll for its results to be binding, unlikely when the site now counts followers of more than 1 billion.
In the meantime, Facebook users are being greeted with invitations for a new service that automatically posts all mobile photos taken to its service, while allowing the user to then choose which photos are shared with their network of friends on the service.
The "Photo Sync" feature, similar to an option on Google+, eliminates the step of uploading a photo to Facebook for mobile users, but Sophos consultant Graham Cluley pointed out in a blog post and interview Monday that it gives Facebook lots of information on users: Location information is embedded in the photos and Facebook could discern others in the photos thanks to its facial-recognition technology.
Facebook could target advertising based on the data it receives from the pictures, "which you may not realize you are sharing," Cluley told the Mercury News on Monday.
Facebook stock fell 3.4 percent Monday to $27.04 after hitting four-month highs every day last week; former partner Zynga performed worse, declining 9.3 percent to $2.23.
Silicon Valley tech stocks
Down: Zynga, Netflix (NFLX), Splunk, Palo Alto Networks, Jive, Facebook, Electronic Arts (ERTS), Nvidia, eBay (EBAY), Yahoo (YHOO), Hewlett-Packard, Symantec, Intuit (INTU), Applied Materials, Juniper, Gilead, LinkedIn, Google
The tech-heavy Nasdaq composite index: Down 8.04, or 0.27 percent, to 3,002.20
The blue chip Dow Jones industrial average: Down 59.98, or 0.46 percent, to 12,965.60
And the widely watched Standard & Poor's 500 index: Down 6.72, or 0.47 percent, to 1,409.46
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.