Dow off 107 on European debt fears

Profit-taking contributes to the sell-off. Worries grow that European banks need more capital. Gold moves higher. Oracle jumps after hiring former Hewlett-Packard CEO Mark Hurd; HP sues.

By Charley Blaine Sep 7, 2010 1:27PM

Charley BlaineUpdated at 8:31 p.m. ET

 

Investors came back to the U.S. stock market today -- and sold. The selling was enough to drive the Dow Jones industrials ($INDU) back into the red for the year. And as investors sold stocks, they bought gold, pushing the metal to new highs. 

The Dow closed down 107 points, or 1%, to 10,341. The Standard & Poor's 500 Index ($INX) was off 13 points, or 1.2%, to 1,092, and the Nasdaq Composite Index ($COMPX) fell 25 points, or 1.1%, to 2,209. Trading volume was extremely light.

Gold for December delivery was up $8.20 to $1,259.30 an ounce. On gold for October delivery, the close was $1258.30, up $8.10. The closes for October and December are record highs.


Crude oil fell $1.12 to $73.48. The dollar was higher against major currencies. 


Interest rates were lower, with the 10-year Treasury yield falling to 2.609% from 2.706% on Monday.


The Treasury sold $33 billion in three-year notes at 0.79%, a record low. The bid-to-cover ratio was  3.21, compared with a recent 3.1. Indirect bidders, mostly central banks, took 42.4%, compared with a recent 40%.


U.S. markets were closed Monday for Labor Day. The stock market had rallied last week as economic news turned out to be less bad than expected. The S&P 500 was up 3.75%, with the Nasdaq up 3.7%. 


The Dow had gained 2.93% and pushed into the black on the year. The Nasdaq-100 Index ($NDX.X) also moved into the black for 2010 on Friday. The index was off 14 points, or 0.7%, to 1,857 this afternoon. With today's losses, both the Dow and the Nasdaq-100 are back in the red for the year. 


Profit-taking and European worries

Profit-taking was surely a cause for today's selling. The ostensible problem was worry about European debt woes. Yields on Greek, Portuguese and Irish bonds were jumping today on default fears.


There were concerns European banks would need to raise more capital. The issue hit U.S. stocks by driving the dollar higher against the euro.  The dollar hit a 15-year low against the yen.

The Wall Street Journal reported that recent stress tests conducted on European banks understated some of the lenders' holdings of risky debt. The Federal Association of German Banks said Monday that the country's 10 biggest banks might need as much as 105 billion euros (or $133 billion) in capital to meet new standards.American Express

Shares of big U.S. multinational companies, financial companies and shares of industrial metals stocks like copper and steel declined. American Express (AXP) was the Dow laggard, down 4.1% to $40.09. Freeport-McMoRan Copper & Gold (FCX) was off 0.9% to $77.86.


But U.S. Steel (X) was a big winner, up 4.6% to $48.09 on reports China will curtail some steel production because of excess inventories.

The S&P 500 dropped for the first time in five days, halting its longest streak of gains since July. Wells Fargo (WFC), JPMorgan Chase (JPM) and Bank of America (BAC) dropped at least 2% to pace a retreat of nearly all 80 financial companies in the index.


No economic reports are scheduled for today. Wednesday, investors will get a read on regional economies with the Federal Reserve's Beige Book.


Only five of the 30 Dow stocks had gains today, led by McDonald's (MCD), up 1% to $75.80, and General Electric (GE), up 0.3% to $15.44. Only 16 Nasdaq-100 ($NDX.X) stocks were higher, led by Oracle (ORCL), up 5.9% to $24.26.


Google (GOOG) shares were off 1.3% to $464.40 despite the company's announcement that it will launch a free service this fall that lets people browse the Web on their televisions. Google would join a growing crowd of companies fighting for a piece of the living room.


Energy prices -- New York close
 

Tues.

Fri.

Month chg.

YTD chg.
Crude oil 

$74.09

$74.60

-6.16%

-6.64%
(per barrel)











Heating oil

$2.0743

$2.0573

-0.66%

-1.95%
(per gallon)











Natural gas 

$3.8520

$3.9390

-21.76%

-30.87%
(per mil. BTU)











Unleaded gasoline

$1.9078

$1.9148

-8.93%

-5.85%
(per gallon)











Retail gasoline

$2.6820

$2.6830

-2.15%

1.63%
(per gallon; AAA)











Markets were closed Monday for Labor Day.


Bristol-Myers Squibb snaps up a biotech

After the close, Bristol-Myers Squibb (BMY) said it will buy ZymoGenetics (ZGEN) for $9.75 a share in cash, or $885 million. BMY says the purchase will lower earnings by 3 cents a share in 2010 and by 7 cents a share in 2011.

ZymoGenetics shares soared 85% after hours to $9.80 from a regular close of $5.30. The Seattle company has working on a small number of drugs. Its Recothrom is used to help control bleeding in surgical procedures.

The stock had hit $24.50 in 2006, then fell back to as low as $2.29 in December 2008.


Boeing restructuring its defense business

Boeing (BA) fell 1.9% to $63.42 after it said it will consolidate its military aircraft business to four divisions from six.


The move will likely result in work reductions, including a 10% cut in the unit's executive positions.


Also, Dennis Muilenburg, the head of Boeing's defense business, said the company is "actively" looking at potential acquisitions and will not rule out a merger with another large defense contractor.


Obama moves to boost economy

President Barack Obama is also expected to introduce a proposal that would allow companies to write off new investments in plants and equipment faster through 2011.


In addition, the president is proposing a $50 billion plan to boost the economy with infrastructure investments in airports, highways and railroads.


The proposal generated talk but not a lot of action in stocks that might be affected, CNBC's Bob Pisani reported. The betting is that resistance from Senate Republicans will block the proposal. 


There was criticism from the left that the proposal is way too small.


Jacobs Engineering (JEC) was up 0.5% to $37.32. Fluor (FLR) was off 0.9% to $47.67. Caterpillar (CAT) was down 0.5% to $69.70.


Oracle jumps on Mark Hurd hiring; HP sues
Oracle announced that former Hewlett-Packard (HPQ) CEO Mark Hurd will join the company as co-president. HP was off 1% $39.92.

The move was expected to help Oracle compete not only against HP but also against IBM (IBM).

HP, however, sued Hurd today. It said Hurd's employment by Oracle could lead to violations of confidentiality agreements and disclose trade secrets.

Hurd resigned from HP last month after an investigation of a sexual-harassment allegation found inaccurate expense reports filed by Hurd or in his name. The HP board said there was no sexual harassment.

Oracle CEO Larry Ellison very publicly supported Hurd.
Material from The Street.com was included in this report.

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

Fri.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.120%

0.125%

-11.11%

140.00%
5-year Treasury note 

1.407%

1.485%

4.84%

-47.62%
10-year Treasury note

2.609%

2.706%

5.33%

-32.11%
30-year Treasury bond

3.669%

3.783%

3.85%

-20.94%
Currencies







 

 
U.S. Dollar Index

82.844

82.070

1.46%

5.91%
British pound

$1.5375

$1.5404

-2.01%

-4.95%
(in U.S. $)











U.S. $ in pounds

£0.6504

£0.6492

2.06%

5.21%
Euro in dollars

$1.2703

$1.2880

-2.69%

-11.37%
(in U.S. $)











U.S. $ in euros

€ 0.7872

€ 0.7764

2.77%

12.83%
U.S. $ in yen 

83.96

84.10

-3.11%

-9.72%
Canada dollar

$0.955

$0.966

-1.73%

0.47%
(in U.S. $)











U.S. dollar 

$1.047

$1.035

1.83%

-0.47%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,259.30

$1,251.10

6.57%

14.88%
(per troy ounce)











Copper

$3.4705

$3.5000

4.80%

3.71%
(per pound)











Silver

$19.9140

$19.9490

10.61%

18.22%
(per troy ounce)











Wheat 

$7.3525

$7.4125

6.06%

35.78%
(per bushel)











Corn

$4.6625

$4.4975

18.71%

12.48%
(per bushel)











Crude oil 

$74.09

$74.60

-6.16%

-6.64%
(per barrel)










 
Markets were closed Monday for Labor Day.

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[BRIEFING.COM] Equity indices strung together a daylong rally on Tuesday, giving the S&P 500 its sixth consecutive advance. Some selling during the final hour of action pressured the indices from their highs, but they still ended with the bulk of their gains. The benchmark index added 0.4% with eight sectors finishing in the green, while the Nasdaq (+1.0%) outperformed throughout the session.

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