Job worries, bank selling hit market

A morning recovery falls apart as a weak report on jobless claims disappoints investors. Wall Street cheers Nike earnings. Gold moves higher, and Starbucks raises prices.

By Charley Blaine Sep 23, 2010 2:14PM
Charley BlaineUpdated: 7:25 p.m. ET

Stocks fell again today as worries about the jobs situation and a sell-off in financial stocks combined to sap any strength in the rest of the market.

The selling was serious enough to question whether what looked like a big breakout with Monday's rally was fizzling.
The Dow Jones industrials ($INDU) were off 77 points to 10,662. The Standard & Poor's 500 Index ($INX) was off 9 points to 1,125. The Nasdaq Composite Index ($COMPX) dropped 7 points to 2,327. Apple (AAPL) briefly topped $290 for the first time.

Among stocks seeing big activity:
  • Goldman Sachs (GS) and Morgan Stanley (MS), down 2.1% to $144.91 and 0.8% to $24.74, respectively, after several analysts cut earnings estimates.
  • GlaxoSmithKline (GSK), down 1.8% to $39.43, after the Food and Drug Administration severely limited the use of the diabetes drug  Avandia in the United States. European drug regulators suspended it entirely.
  • Tiffany (TIF), down 1.9% to $44.69. The world's second-largest luxury jewelry retailer was cut to "sell" from "neutral" at Goldman Sachs.
  • Bed Bath & Beyond (BBBY), up 3.2% to $43.40. The home furnishings retailer boosted its profit growth forecast for 2010 to 20% from 15%.
  • DineEquity (DIN), up 1.7% to $41.25. Same-restaurant sales at the company's Applebee's chain grew 2.7% from a year ago in the first 11 weeks of the quarter.
  • Rite Aid (RAD), down 13.6% to 95 cents. The drugstore chain had a second-quarter loss excluding one-time items of 16 cents a share. Same-store sales for the quarter decreased 1.5% from a year ago.

For Nike, business is very good

After the close, Nike (NKE) shares jumped more than 4.9% to $81.50 from a regular close of $77.50 after easily beating Street estimates on first-fiscal-quarter earnings. Nike shares have risen nearly 17.8% this year.Nike

The athletic apparel and equipment maker earned $559 million, or $1.14 a share, on revenue of $5.18 billion. Earnings were up 10% from a year ago and 13 cents a share better than the consensus analyst estimate. Revenue was up 8% from a year ago but came up short of the analyst estimate of $5.22 billion.

Nike said sales were strong in all markets except Japan. Sales were up 23% in China, 24% in emerging markets and 14% in North America, which represents 37% of sales.

Orders for goods to be delivered between September and January were up 10% to $7.1 billion. Excluding currency changes, orders would be 13%.


Late selling raises fears

The declines were the third straight for the S&P 500 and the Nasdaq and second in a row for the Dow. And futures trading suggests the market could open down slightly on Friday.


Gold settled up $4.20 to a new closing high of $1,296.30 an ounce.


Crude oil added 47 cents to $75.18 a barrel. Interest rates were up slightly, with the 10-year Treasury yield falling to 2.555% from 2.548% on Wednesday. The dollar was mostly higher against major currencies. 


A report on August existing-home sales was a bit better than expected, but sales are still running at their lowest levels since 1995. A report on new-home sales is due Friday morning. The annualized sales rate has been hovering at record low levels since the end of 2008.


Did the market peak this week?

The concern over the breakout fizzling stems from the S&P 500's performance. On Monday, the index popped over 1,130. That translated into a gain of 8.9% on the month.


The 1,130 level had been closely watched by investors because it had formed a top for the index several times since April and influenced the rest of the market. Today's pullback brought the index below 1,130, and some traders fear the selling will continue. 


The estimate cuts for Goldman Sachs and Morgan Stanley weighed heavily on financial stocks. The S&P 500 financial-sector exchange-traded fund (XLF) fell 1.9% to $14.23.


Bank of America (BAC) fell 1.9% to $13.17. Wells Fargo (WFC) was off 3% to $25.04.

In addition, former Federal Reserve Chairman Paul Volcker said the nation's mortgage system was dysfunctional and needed urgent repair. And that was just the start of a blistering critique of the entire financial system.

Energy prices -- New York close
 

Thur.

Wed.

Month chg.

YTD chg.
Crude oil 

$75.18

$74.71

4.53%

-5.27%
(per barrel)











Heating oil

$2.1145

$2.1070

6.17%

-0.05%
(per gallon)











Natural gas 

$4.0190

$3.9660

5.32%

-27.87%
(per mil. BTU)











Unleaded gasoline

$1.9078

$1.9148

3.23%

-6.60%
(per gallon)











Retail gasoline

$2.7150

$2.7200

1.42%

2.88%
(per gallon; AAA)












Jobless claims disappoint; existing-home sales up from July

The jobless claims increase was a disappointment because economists had expected initial jobless claims to remain unchanged from a week earlier.

The government had reported declines in three of the last four weeks.

The increase confirms that employers' reluctance to hire persists, Aichi Amemiya of Nomura Securities wrote in a note to clients.

Meanwhile, the National Association of Realtors said existing-home sales rose to an annualized 4.13 million in August from 3.84 million in July, meeting economists' expectations. But the sales rate was off 19% from August 2009.

Home sales have dropped since the expiration of homebuyer tax credits. About 31% of the buyers were purchasing their first homes, and 34% of the sales were distressed -- either from foreclosures or short sales -- up from 32% in July.

The median price of a home was $179,300, down slightly from July but up 1.2% from a year ago. There were 3.98 million homes on the market, the organization said, representing an 11.6-month supply. A six months' supply is considered normal.

Homebuilder shares were mostly lower. Pultegroup (PHM) was off 2.5% to $8.18. D.R. Horton (DHI) was off 2.5% to $10.62.

The Commerce Department will report new-home sales on Friday.

The Dow has a downside bias; Apple tops $290
Only four of the 30 Dow stocks were higher today: Hewlett-Packard (HPQ), Alcoa (AA), Travelers (TRV) and Caterpillar (CAT).


Walt Disney (DIS) was the benchmark's biggest laggard, down 2.6% to $33.12.


Thirty-eight of the stocks in the Nasdaq-100 Index ($NDX.X) were higher, led by Bed Bath & Beyond. The index was off slightly to 1,982. It had reached as high as 2,002, its highest intraday level since May, before the sell-off set in.

Apple reached as high as $292.29, a new intraday high, before falling back to $288.92, up 0.4%. The stock is up nearly 21% this month alone. Piper Jaffray analyst Gene Munster boosted his forecast for 2011 Apple iPad sales to 21 million units from 14.5 million units.

In company news, Starbucks (SBUX) said it was increasing prices on certain drinks in specific markets, citing higher ingredient costs. The shares were off 1.9% to $25.45.


Blockbuster filed for Chapter 11 bankruptcy protection and reached an agreement with bondholders to recapitalize its balance sheet. The video-rental chain said the move will reduce its debt to an estimated $100 million from nearly $1 billion. Shares fell 22% to 4.3 cents.


McDonald's (MCD) increased its quarterly dividend 11% to 61 cents a share. Shares were off 0.7% to $74.64.


Material from The Street.com was used in this post.


Short hits from the markets -- New York close
 
  Thur.

Wed.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.150%

0.155%

11.11%

200.00%
5-year Treasury note 

1.321%

1.311%

-1.56%

-50.82%
10-year Treasury note

2.555%

2.548%

3.15%

-33.52%
30-year Treasury bond

3.733%

3.742%

5.66%

-19.56%
Currencies







 

 
U.S. Dollar Index

80.247

80.064

-3.31%

2.59%
British pound

$1.5684

$1.5657

2.16%

-3.04%
(in U.S. $)











U.S. $ in pounds

£0.6376

£0.6387

-2.12%

3.14%
Euro in dollars

$1.3317

$1.3405

5.03%

-7.08%
(in U.S. $)











U.S. $ in euros

€ 0.7509

€ 0.7460

-4.79%

7.63%
U.S. $ in yen 

84.53

84.52

0.51%

-9.11%
U.S. $ in Chinese

6.73

6.70

-1.12%

-1.40%
yuan











Canada dollar

$0.968

$0.972

3.14%

1.77%
(in U.S. $)











U.S. dollar 

$1.034

$1.029

-3.04%

-1.75%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,296.30

$1,292.10

3.68%

18.25%
(per troy ounce)











Copper

$3.5905

$3.5650

6.83%

7.29%
(per pound)











Silver

$21.2130

$21.0550

9.36%

25.93%
(per troy ounce)











Wheat 

$6.9725

$7.1975

6.86%

28.76%
(per bushel)











Corn

$4.9925

$5.0500

17.61%

20.45%
(per bushel)











Crude oil 

$75.18

$74.71

4.53%

-5.27%
(per barrel)










 
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