USA Stox skid hard amind new fears of Euro collapse
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Info from News, Posted in Recession / Depression
Stocks fell to their worst losses since mid-August as new fears erupted that Europe's debt crisis is deteriorating, with the euro possibly falling apart as a currency.
The Dow Jones industrials ($INDU) closed down nearly 400 points, and the Standard & Poor's 500 Index ($INX) and the Nasdaq Composite Index ($COMPX) both dropped back into negative territory for the year.
A day of big losses accelerated on a Reuters report that France and Germany were working on a plan for a more integrated but smaller eurozone. The idea assumes that one or more countries (probably starting with Greece) will leave the currency union. The remaining countries would move toward deeper economic integration, including on tax and fiscal policy.
Stock prices fell more than 2% across Europe, with bank stocks in France especially hard hit. U.S. bank stocks also sold off. Commodities, including gold (-GC), silver (-SI) and crude oil (-CL), moved lower. The yield on the 10-year U.S. Treasury fell below 2% for the first time since
The Dow closed down 389 points, or 3.2%, to 11,781 after falling as many as 433 points in the late afternoon. The S&P 500 finished down 47 points, or 3.7%, to 1,229. The Nasdaq was down 106 points, or 3.9%, to 2,622.
The losses were the worst for the major averages since Aug. 18, when the Dow fell 420 points. With today's losses, the S&P 500 is off 2.3% for the year. The Nasdaq is down 1.2% for the year. The Dow is still sporting a 1.8% gain for 2011.
Exacerbating the market's woes today was General Motors' (GM) 12% profit decline that included a warning that weakness in its European business may cause the company to miss some of its 2011 profit targets. Shares fell as much as 10.9% to $22.31. In addition, Adobe Systems (ADBE) shares fell 7.7% to $28.08 after announcing reducing its profit guidance and plans to cut 750 jobs.
What's not clear is if the selling, which was panicky at times, was done by humans or by machines acting as their proxies. A counter argument is that the selling was being done by companies who had taken on counter-party risk and weren't sure they'd get their money.
Cisco Systems (CSCO) reports after the close. Shares were off 3.4% to $17.68.
No place to hide
All 30 Dow stocks were lower, with most down at least 2%. Declines in five stocks -- IBM (IBM), Chevron (CVX), Caterpillar (CAT), 3M (MMM) and JPMorgan Chase (JPM) -- contributed 145 points of the loss for the blue chips by themselves.
The best Dow performers were Verizon Communications (VZ), down 1.7% to $36.89, and AT&T (T), down 1.9% to $28,91.
Only one S&P stock was higher: Best Buy (BBY), up 1.4% to $27.22. Best Buy apparently was boosted by a note from from Cleveland Research saying channel checks by the firm confirm Best Buy may post its first monthly gain in same-store sales in six quarters.
Alibaba Group Holding (ALBCF) and Softbank (SFTBY) are talking with private-equity funds about making a bid for all of Yahoo without the company's blessing, Bloomberg News reported. The two are interested in buying back stakes that Yahoo owns in each.
Meanwhile, Vertex Pharmaceuticals (VRTX), up 1.4% to $30.86, was the only stock in the Nasdaq-100 Index ($NDX) to finish higher on the day. The index, which tracks the largest Nasdaq stocks, was down 86 points, or 3.6%, to 2,314.
Gold, silver, oil move lower
Gold settled down $7.60 to $1,791.60 an ounce in New York. Silver was down 57 cents to $34.51 an ounce. Copper (-HG) settled down 9.2 cents to $3.441 a pound.
Crude oil rallied initially after the weekly inventory report from the Energy Department showed lower-than-expected domestic supplies. But crude fell back as stocks plunged, settling at $95.74 a barrel in New York, down $1.06. Brent crude was off $2.82 to $112.18 a barrel as traders bet that Europe is heading into recession at the least.
Energy prices -- New York close
Wed.
Tues.
Month chg.
YTD chg.
Crude oil (-CL)
$95.74
$96.80
2.74%
4.77%
(per barrel)
Heating oil (-HO)
$3.0986
$3.1161
1.32%
21.81%
(per gallon)
Natural gas (-NG)
$3.6520
$3.7450
-7.17%
-17.09%
(per mil. BTU)
Unleaded gasoline (-RB)
$2.6442
$2.7064
1.48%
7.79%
(per gallon)
Brent crude
$112.64
$115.00
2.81%
18.88%
(per barrel)
Retail gasoline
$3.4300
$3.4140
-0.38%
11.65%
(per gallon; AAA)
Europe hits the banks
Today's selling began when the yield on Italy's 10-year bond topped 7% for the first time, raising worries that it won't be able to service any new debt.
The 7% level is the threshold that prompted Greece, Ireland and Portugal to seek bailouts.
Italy became a big problem a day after it wasn't a problem. The turnabout came about because it wasn't clear when Prime Minister Silvio Berlusconi would resign. He promised to do so once a new austerity law comes into being, but that could take weeks.
That Berlusconi was going to step down was the catalyst for a nice stock rally on Tuesday. He has been widely criticized for dragging his feet on getting Italy's financial house in order. And there's skepticism that Berlusconi is willing to give up his post.
"Markets are telling Berlusconi to leave NOW," New York University economist Nouriel Roubini wrote today on Twitter. "They don't buy his scheme of pretending to leave in two weeks after budget is passed."
Germany's Xetra Dax Index ($DE:DAX) closed down 132 points, or 2.2% to 5,830. France's CAC-40 Index ($FR:PX1) was off 68 points, or 2.2%, to 3,075. The FTSE MIB Index ($IT:FTSEMIB), which tracks stocks in Milan, fell 592 points, or 3.8%, to 15,072.
Shares of large U.S. banks fell in part because many have large European interests. In adddition to JPMorgan Chase, Morgan Stanley (MS) declined 9% to $15.76. Citigroup (C) slid 8.2% to $28.85. Bank of America (BAC) fell 5.7% to $6.16. Goldman Sachs (GS) lost 8.2% to $99.67.
Why GM shares fell
General Motors shares sagged after the company reported that its Europe operations lost $292 million before interest and taxes in the third quarter. GM said it no longer expects to achieve its target to break even in the region, citing "deteriorating economic conditions."
Overall, GM earned $1.7 billion, or $1.03 a share, down from $2 billion, or $1.20 a share, a year ago. Revenue was $36.7 billion. Earnings beat the Street estimate of 96 cents a share. Revenue was in line with estimates.
Europe continues to be a big drag for GM. The operation lost $300 million in the quarter, an improvement over a year ago's loss of $600 million. But the European debt crisis is hitting car sales on the continent, the company said.
Macy's, Ralph Laurel shares fall
Macy's (M) shares dropped 5.3% to $30.45 after the department-store chain offered lower guidance for its fiscal fourth quarter. The company expected earnings of $1.52 to $1.57 a share in the quarter.
Analysts have been looking for $1.60 a share.
Macy's earned 32 cents a share in the fiscal third quarter, 16 cents better than expectations. Gross margin fell 49 basis points to 39.4%, although the company's operating margin grew.
Ralph Lauren (RL) shares declined 5.7% to $149.94. The clothing retailer said it expects third-quarter sales to grow at a percentage rate of "low-teens." Analysts, on average, estimated an increase of 15%.
Adobe faces pressure on its Flash technology
Adobe Systems' 7.7% decline to $28.08 was the fourth-worst decline among Nasdaq-100 stocks and 17th worst among S&P 500 stocks.
The largest maker of graphic-design software said Tuesday it will cut 750 jobs as it lessens its focus on older products and shifts investment to programs for digital publishing and Web advertising.
Adobe plans to stop making Flash technology for mobile devices. The company is facing competition from Apple (AAPL) and Microsoft (MSFT) and an industry shift away from Flash for Internet programming. (Microsoft is the publisher of MSN Money.)
Short hits from the markets -- New York close
Wed.
Tues.
Month chg.
YTD chg.
Treasury yields
13-week Treasury bill
0.0100%
0.080%
0.00%
-91.67%
5-year Treasury note
0.862%
0.916%
-14.74%
-57.24%
10-year Treasury note
1.955%
2.065%
-10.11%
-40.85%
30-year Treasury bond
3.016%
3.125%
-5.72%
-30.86%
Currencies
U.S. Dollar Index
78.167
76.751
2.44%
-1.41%
British pound
1.5926
1.6100
-0.99%
2.05%
(in U.S. $)
U.S. $ in pounds
£0.628
£0.621
1.00%
-2.01%
Euro in dollars
$1.35
$1.38
-2.25%
1.25%
(in U.S. $)
U.S. $ in euros
€ 0.738
€ 0.723
2.30%
-1.23%
U.S. $ in yen
78.00
77.73
-0.55%
-4.13%
U.S. $ in Chinese
6.36
6.34
-0.20%
-3.81%
yuan
Canada dollar
$0.979
$0.991
-2.16%
-2.42%
(in U.S. $)
U.S. dollar
$1.022
$1.009
2.22%
2.48%
(in Canadian $)
Commodities
Gold (-GC)
$1,791.60
$1,799.20
3.85%
26.04%
(per troy ounce)
Copper (-HG)
$3.441
$3.533
-5.26%
-22.62%
(per pound)
Silver (-SI)
$34.3610
$35.1530
0.02%
11.07%
(per troy ounce)
Wheat (-ZW)
$6.4300
$6.5700
2.35%
-19.04%
(per bushel)
Corn (-ZC)
$6.5600
$6.61
1.39%
5.38%
(per bushel)
Cotton
$0.9718
0.9762
-5.00%
-32.89%
(per pound)
Coffee
$2.3345
2.3285
1.32%
-2.93%
(per pound)
Crude oil (-CL)
$95.74
$96.80
2.74%
4.77%
(per barrel)