Dow falls 163 on European fears and Intel warning

But US stocks rebound from early lows after Moody's says last week's eurozone summit solved nothing. Intel cuts its revenue outlook. Gold drops below $1,700. The Fed meets Tuesday.

By Charley Blaine Dec 12, 2011 2:05PM
Charley BlaineUpdated: 10:13 p.m. ET

Investors spent the weekend thinking about the European debt deal and liked it a lot less than they did on Friday.

So, stocks gave up much of their gains from Friday. The euro fell to its lowest level against the dollar in two months as many investors sought safety. Gold (-GC) tumbled below $1,700 an ounce for the first time since Nov. 25; crude oil (-CL) settled below $98. If you wanted some holiday cheer, you got it in a rebound that cut the losses for stocks by about a third.

The European problem came into sharp focus when Moody's Investor Service said over the weekend that last week's agreement by all European Union countries to stricter fiscal controls doesn't solve their problems.

Adding to the gloom was a profit warning from Intel (INTC), down $1.01 to $24. The chip giant now expects fourth-quarter revenue of $13.4 billion to $14 billion, down from a prior forecast of $14.2 billion to $15.2 billion. Analysts had expected $14.65 billion. Personal computer sales will be lower than expected because of hard-drive shortages, the result of heavy flooding in Thailand earlier this year.

The Dow Jones industrials ($INDU) closed down 163 points, or 1.3%, to 12,021. The blue chips had been down as many as 243 points. The Standard & Poor's 500 Index ($INX) was off 19 points, or 1.5%, to 1,236 after falling nearly 28 points. The Nasdaq Composite Index ($COMPX) was off 35 points, or 1.3%, to 2,612.

Article continues below.
The Dow's decline marks the third straight day of gains or losses of 160 points or more. The index fell 199 points on Thursday and gained 187 points on Friday.

Futures trading suggests the market may open higher on Tuesday.

For the technically minded, the S&P 500 in the morning fell through  important support at 1,233 -- a level that should have generated new buying. But the index found support at 1,227 and ended the day back above 1,233.

The sell-off was broad, though volume was light. Only 522 million shares changed hands on the floor of the New York Stock Exchange.

Only two of the 30 Dow stocks finished higher: McDonald's (MCD), up 45 cents to $98.48, and WaltDisney (DIS), up 9 cents to $36.65.

Meanwhile, 36 S&P 500 stocks were higher, led by Vulcan Materials (VMC), a hostile takeover target, up $5.15 to $38.70

Only 17 stocks in the Nasdaq-100 Index ($NDX) were higher, led by Netflix (NFLX), up $4.37 to $75.26. Netflix was rising on speculation that Verizon Communications (VZ) might make a bid for the video streaming company.

The index, however, was down 24 points, or 1.1%, to 2,294. Intel was among the biggest problems. All of the stocks in the Philadelphia Semiconductor Index ($SOX) were lower. The index was down was down 13 points, or 3.4% to 363.

Meanwhile, the dollar was up 1% against the euro and by small amounts against the British pound and the yen. U.S. interest rates moved lower as a result. The 10-year Treasury yield was 2.009%, down from Friday's 2.05%.

Crude oil settled down $1.64 to $97.77 a barrel. Silver (-SI) dropped $1.251 to $31.002 an ounce. Copper (-HG) dropped 9.35 cents to $3.464 a pound. It's off 22.1% for the year, a price drop that has worried many economists about global economic prospects in 2012. Gold settled down $48.60 to $1,668.20 an ounce.

Energy prices -- New York close



Mon.

Fri.

Month chg.

YTD chg.
Crude oil (-CL)

$97.77

$99.41

-2.58%

6.99%
(per barrel)











Heating oil (-HO)

$2.8961

$2.9125

-4.26%

13.85%
(per gallon)











Natural gas (-NG)

$3.2540

$3.3170

-8.34%

-26.13%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.5636

$2.5961

0.20%

4.50%
(per gallon)











Brent crude 

$107.26

$108.62

-2.95%

13.20%
(per barrel)











Retail gasoline

$3.2740

$3.2790

-0.64%

6.58%
(per gallon; AAA)












Dowgrades ahead for European bonds
Because of the uncertainty after last week's summit, most European countries face downgrades on their government bonds in the next few months. Moody's is expected to decide on downgrades in the first quarter of 2012.

Standard & Poor's is expected to follow up soon on its rating decision for the sovereign debt of eurozone countries. The ratings firm put a negative credit watch on the region last week, saying it would conclude its review after the EU summit.

Yields on Italian and French bonds moved higher.

A big week with the Fed, earnings, Zynga's IPO
The sell-off comes at the start of a week that has the potential for a fair amount of drama.

The Federal Reserve will meet Tuesday to discuss interest rates and monetary policy. There is an important report on retail sales for November due on Tuesday, along with reports on wholesale and consumer inflation on Thursday and Friday.

Plus, Congress is wrangling over the terms of a new spending bill to keep the government running beyond Friday.

General Electric (GE) will holds its annual business outlook conference Tuesday afternoon. Plus, there are earnings due from Best Buy (BBY) on Tuesday, Joy Global (JOYG) on Wednesday and FedEx (FDX) and Research In Motion (RIMM) on Thursday.

Zynga is expected to price its initial public offering after Thursday's close. The social-gaming company plans to offer as much as $1 billion of stock, selling 100 million shares for $8.50 to $10 each.

Also expected to go public is Michael Kors Holdings, a Hong Kong-based luxury apparel retailer. Kors Holdings is seeking as much as $792 million on Wednesday, offering 41.7 million shares at $17 to $19 apiece on behalf of existing stockholders. Kors is trimming his personal stake from 12% to 8.6%. 

Banks and energy are the weak links
All 10 sectors of the S&P 500 are lower, with energy, financial and materials stocks the weakest groups.

Energy shares slumped on concerns grow that Europe's debt crisis could lead to "a recession that could significantly inhibit oil demand," independent oil trader and analyst Jim Ritterbusch said in a research note.

Oil services giant Halliburton (HAL) was down $1.52 to $32.56. Exxon Mobil (XOM) dropped $1.29 to $80.05.  But refiner-and-marketerTesoro (TSO) rose 13 cents to $21.92.

Bank of America (BAC) was the weakest Dow stock, down 27 cents to $5.45. JPMorgan Chase (JPM) dropped $1.14 to $32.04. Citigroup (C) fell $1.55 to $27.22.


Among the day's movers:

Vulcan Materials, which produces construction aggregate materials, was hit with a hostile takeover bid valued at $4.7 billion from Martin Marietta Materials (MLM). Vulcan had broken off talks with Martin Marietta. The offer is for a half-share of Martin Marietta Materials for every Vulcan share. Martin Marietta Materials shares were up $1.24 to $74.61.

Amazon.com (AMZN) shares were off $3.51 to $189.52. The company will roll out a Kindle Fire update within the next two weeks, The New York Times said today, aimed at fixing problems that have concerned many early users. The update will bring improved performance and multitouch navigation, says the Times. Furthermore, users will be able to erase recent activity for improved privacy.

Diamond Foods
(DMND) shares were down $9.26 to $31.30. The company won’t file its quarterly financial statements on time because its audit committee isn’t done with an investigation on how the company accounted for payments to walnut growers in light of several class-action lawsuits last month. The audit committee plans to finish its investigation by February 2012. The controversy is holding up its deal to buy Pringle's from Procter & Gamble (PG).

Media and entertainment company Time Warner (TWX) has approached Endemol, the Dutch producer of the "Big Brother" TV shows, with a revised, all-cash offer of $1.3 billion, The New York Post said. The bid comes as Endemol tries to agree on a debt reorganization plan with creditors. Time Warner shares dropped 36 cents to $34.24.

Short hits from the markets -- New York close



Mon.

Fri.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0400%

0.010%

300.00%

-66.67%
5-year Treasury note 

0.859%

0.881%

-9.77%

-57.39%
10-year Treasury note

2.009%

2.052%

-2.85%

-39.21%
30-year Treasury bond

3.046%

3.100%

-0.52%

-30.17%
Currencies











U.S. Dollar Index

79.58

78.681

1.39%

0.37%
British pound

1.5588

1.5649

-0.61%

-0.11%
(in U.S. $)











U.S. $ in pounds

£0.641

£0.639

0.61%

0.11%
Euro in dollars

$1.32

$1.34

-1.85%

-1.40%
(in U.S. $)











U.S. $ in euros

€ 0.758

€ 0.748

1.88%

1.42%
U.S. $ in yen 

78.06

77.63

0.31%

-4.06%
U.S. $ in Chinese

6.38

6.36

-0.08%

-3.49%
yuan











Canada dollar

$0.975

$0.000

-0.63%

-2.84%
(in U.S. $)











U.S. dollar 

$1.026

$1.020

0.64%

2.93%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,668.20

$1,716.80

-4.69%

17.36%
(per troy ounce)











Copper (-HG)

$3.464

$3.558

-3.12%

-22.10%
(per pound)











Silver (-SI)

$31.0020

$32.2530

-5.49%

0.21%
(per troy ounce)











Wheat (-ZW)

$5.9425

$5.9600

-3.22%

-25.18%
(per bushel)











Corn (-ZC)

$5.9400

$5.94

-2.30%

-4.58%
(per bushel)











Cotton 

$0.8716

0.9043

-4.12%

-39.81%
(per pound)











Coffee

$2.2105

2.2775

-6.69%

-8.09%
(per pound)











Crude oil (-CL)

$97.77

$99.41

-2.58%

6.99%
(per barrel)










 

127Comments
Dec 12, 2011 2:51PM
avatar
Wow! How many of us reading this article needed all weekend to figure out that last week's EU agreement didn't "solve its problems"?
Dec 12, 2011 3:29PM
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Anyone want to bet Friday's headline will be "Stocks recover on European plans to fix the Deficit"

 

Monday's headlines?

Stocks give back all the gains.

it's been the same BS the last 4 weeks in a row.

A shell game

Dec 12, 2011 3:27PM
avatar
The whole world is broke except China and a few other countries.  Entitlements that can not be paid for has put the western world in a pickle.  We can not survive as a country where less than 50% does not pay any taxes and gets some kind of assistance off the government.  It has come to the point where the do nothings are in the majority so they will vote for their survival on government handouts until we are down the tubes.  Then, there are the people with money that lobby our representatives to give them what they want and the richest get out of paying taxes.  That leaves us few working stiffs that have no representation and to carry the deadbeats on both sides.  I don't know about you, but I am sick of politics as usual, let's throw all the bums out of DC and make the bums here at home work for a living.
Dec 12, 2011 4:19PM
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I don't see a good republican candidate in the mix either. However, the thought of Obama for another term is awful!
Dec 12, 2011 3:05PM
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I am getting damn tired of these market gyrations.  The only people making money are congressional representatives, their aides and families.  It is time to let Europe sink and then get on with things.  We paid their defense bill since WW II which allowed them to institute the unsustainable socialist programs they have.  Now they are broke and so are we and with our dimwits in congress and the joke of a president the house of cards comes down.
Big investors get the market moving up hundreds of points a day until the little guy jumps in and then they sell, reap a profit and start the crap all over again.
The global economy is nothing but a bunch of garbage to screw the little people.

Dec 12, 2011 5:22PM
avatar

Obama’s staunchest supporters, Progressives for Obama, is “a Who’s Who of 60s radicals” who were forced to testify before the House Committee on Un-American Activities.  His core values were formed by a close relationship with communist mentor, Frank Marshall Davis. Socialist, Barack Hussein Obama Sr., also influenced his current world view. When placed in perspective with an “almost criminally negligent” handling of American fiscal policy, one begins wonder if there is an agenda at work.

 

Our best hope is to remove the Democrats from office, especially Obama!

Dec 12, 2011 5:17PM
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The supreme court justices are a joke .
Dec 12, 2011 3:47PM
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I disagree with you, we are in a mess, because the BIG BANKS were bailed out, and now they are controlling us. Americans can work, and work, and work, but unless you are trading daily in the stock market, there is NO place to make interest on your hard earned money. The banks are making money, and not paying out interest, period. Find a bank that is paying decent interest on CDs, savings, bonds or anything else, and please let me know lol
Dec 12, 2011 2:26PM
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Up the cornholio with your portfolio.
Dec 12, 2011 3:48PM
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First of all, it should be criminal that any corporation does not pay any taxes.  There is a long list of successful businesses that do not pay anything, and then there are the other 50% of the deadbeats in this country that do not contribute to taxes.  We have labor unions that bribe members of both parties to vote for their pensions and benefits.  Congress and the President is sold to the highest bidder.  Until we the people are represented  by the politicians that are not bribed, we are doomed.  The first thing we ought to do is empty the jails so we have room for the real crooks, politicians, lawyers, and judges.  These three groups have ruined this country.  Fire them all, and come on third party that represents us. 
Dec 12, 2011 3:10PM
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Well you didn't like the last post so I am going to post yet another.  Have any other Americans wondered why this great country has become SO DIVIDED, since Obama took office? When I step back and look at everything he has done, and who is actually benefiting during his time in office, I see the wealthy big banks, that he has enabled! That IS who he has helped! Obama has absolutely NOT a CLUE to how to run this country! Open your eyes, look at what he has done! He has spent more money than any other President ever! Banks have taken homes, jobs are lost, middle class citizens have lost their retirement, colleg graduates cannot pay loans back OR even find a job. You cannot live or should you have to working at a fast food res. It will not support a family. Get real, Obama is a total disaster! Vote him out or we will all be drinking kool-aid from losing our mone!
Dec 12, 2011 3:04PM
avatar

Merkel's plan for the euro is to exterminate the pesky little coin. I don't know

Plus, Congress is wrangling over a new spending bill to keep the government running beyond Friday.

Four shut-down attempts in one year .. that ought to be a new record for any Congress.Sarcastic

Dec 12, 2011 4:41PM
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What happened?  Stocks were SOARING on Friday, and I thought everything was just peachy!!
avatar
??? They ran out of $1 trillion dollars already??? Thought it was suppose to last until election day 2012. 

Wow they must really be blowing thru the money fast now.

Plus, Congress is wrangling over the terms of a new spending bill to keep the government running beyond Friday.
Dec 12, 2011 3:29PM
avatar

I think it time for me to take a brief break from this site.  I have observed childish prattle mostly from folks that do not take the time to do any research.

  1. Politicians - all are crooks and ALL including the anointed one are on someone's payroll and don't care about the citizens who elect them.
  2. Europe - realize that Europe is a consumer of the products and services we make.  They are in the toilet which means they can not purchase the products and services we have.  It is a MARKET.
  3. Debt - some debt is good (this is called investment) but extreme debt is bad because there is no return on investment.

Good by for now...Vote for the best choice and DO YOUR HOMEWORK...RESEARCH

Dec 12, 2011 3:27PM
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Mr. Myers, all I can say to that is "You've got to be kidding me", right? Yes we were already in a mess, but look whar he has done to magnify the mess. Cash for clunkers was a horrible mistake for the middle class. Healthcare reform  is a disaster and will do nothing but drive up costs. Taxpayer money "SPENT" TO BAIL OUT THE BIG BANKS, which have devoured American homes and families, People desparately looking for work. This corrupt stock market. I am a business owner, and for the first time in my business, I have seen a horrible effect since he took office. NEVER, NEVER BAIL OUT THE BIG BANKS NEVER. I am wondering if what some people are saying about Obama, might not be true.........I will vote for anyone BUT HIM IN 2012.
Dec 12, 2011 4:43PM
avatar

Some ideas

1) No more lifetime politicians- Total power = total corruption. Shorter Term limits.

 

2) Campaign contributions - This should be banned. Unions, Companies, Schools, etc should NOT be given money to a politician so they can return the favor when they are elected. No party should get money from anyone. Not the right gun lobbyist and not the Unions for the left. No one.

The system is skewed towards corruption. 

This is EXACTLY how we get screwed.

 

3) Why can't we VOTE on some of these bills submitted and/or passed?

Why can't we have some say as to what they are doing to our country?

 

4) what about a watchdog for both parties that works for the people?

Someone to look at these shady deals before they go down?

 

 

 

Dec 12, 2011 3:19PM
avatar
Like we advised this morning, remain on the sidelines, this will get worse before it gets better; manipulators are controlling every bit of this market...We said their goal was to drop us 240-250....We are already down 230 so, your guess is as good as ours. Cheating crooks having another exceptional day laughing and having a great time. Closing time cant come soon enough today...Sad.
avatar
Oduffus quote from last weeks speech:

“This country succeeds when everyone gets a fair shot, when everyone does their fair share and when everyone plays by the same rules,”

The same rules???????, like GM, like Chrysler, like the UAW, like ACORN, like the black panthers, like SEIU, like congressional insider trading, like the banks, like the 2200 "special exceptions" to Otardcare, like 53% paying ALL the federal taxes, like THE ILLEGALS THAT THE AMERICAN PEOPLE ARE FORCED TO PROVIDE FOR, WHO ARE A DIRECT RESULT OF HIGHLY PAID REPRESENTATIVES THAT REFUSE TO ACKNOWLEDGE, AND ENFORCE.............​​.THE LAW........ AND MORE IMPORTANTLY SET THE EXAMPLE THAT THEY THINK THAT THEY ARE ABOVE THE LAW!

OOOH,.......... T H O S E ...........KIND OF "SAME RULES"!
Dec 12, 2011 4:18PM
avatar
I'm a Democrat and I have to agree with Mirage Guy. We won't have this stock market drama
every day if we can get to pro-business and NO MORE OBAMA.

Vote for Romney, please. I know most republicans don't prefer him over others but,
like me he will get many Democrats & Independents votes. He can beat Obama: I doubt
if the others can.
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