Reverse Spin: Drab economy sends stocks tumbling

Save the economy – pat a pony. Thanks to a depressing government report on the economy, stocks took a tumble Wednesday.

The Federal Reserve, in its anecdotal survey of national economic conditions – the infamous Beige Book – said that the economy remained sluggish in June and July, and that the manufacturing sector’s troubles were spilling into other areas of the economy.

The Nasdaq Composite Index dropped below 2000 for the first time in about two weeks. It finished down 61.43 points, or 3.03%, at 1966.36. The Dow Jones Industrial Average fell 165.24 points, or 1.58%, to 10293.50, while the Standard & Poor’s 500 stock index lost 20.87 points, or 1.73%, to end at 1183.53. “It’s just a continuation of no good news and nothing to really demand that people step up and pat the pony and start buying stocks,” Ned Collins, a Daiwa Securities America trader, reportedly said.

Investors throw in the towel

Need more evidence that investors are feeling the summertime blues?

Preliminary estimates released Wednesday from TrimTabs.com Research Inc. show that investors yanked $14.7 billion from U.S. stock funds last month, the first outflows since March.

TrimTabs, in Santa Rosa, Calif., said investors pulled $9.8 billion from growth and aggressive-growth funds. “Investors could be throwing in the towel,” reportedly said Shannon Reid, manager of the $700 million Evergreen Select Strategic Growth Fund. The market decline has “been such a long, drawn-out process, I think they are kind of giving up.”

Nothing to sneeze at

A coalition of consumer groups thinks the maker of the allergy drug Claritin is allergic to the truth.

The Prescription Access Litigation project in Boston Thursday filed a lawsuit against pharmaceutical heavyweight Schering-Plough Corp. that accuses the Kenilworth, N.J., company of deceptively advertising and overpricing Claritin.

The suit, filed in New Jersey Superior Court, seeks a declaration that the Claritin advertisements breach state consumer law, an injunction to prevent future illegal advertising, and a refund for part of the $10 billion that consumers have spent on the drug since mid-1997.

Mutual feelings

Apparently, the feeling that Prudential Financial would be better off as a public company is (de)mutual. On Monday, the Newark, N.J., company announced that policyholders voted in favor of its plan to convert to a publicly traded company later this year.

Four million of Prudential’s 11 million eligible policyholders voted on the plan, Prudential said, 92% of whom voting in favor of the plan. In an April filing with the Securities and Exchange Commission, Prudential said it planned to sell 89 million shares – about 16% of the company – to investors at about $30 a share. The IPO is expected to raise about $3 billion.

Name smear

Talk about an expensive smear campaign. Waddell & Reed Financial Inc. on Tuesday was ordered to pay former employee Stephen Sawtelle $27 million in damages for trashing the broker’s reputation and trying to steal his clients after he was fired from the Overland Park, Kan., company. Waddell & Reed said it would appeal the arbitration ruling by the National Association of Securities Dealers, calling it an “unfathomable finding that should not stand.”

Mr. Sawtelle said he was fired in retaliation for talking to the Securities and Exchange Commission as it investigated a former Waddell & Reed broker for the embezzlement of $3 million.