Stocks fall on Fed worries, earnings

First-time unemployment claims fall, but investors focus on the bigger picture. Quarterly earnings at Exxon and Motorola beat expectations. 3M stock drops after forecast cut.

By TheStreet Staff Oct 28, 2010 8:00AM

TheStreetBy Melinda Peer, TheStreet

 

Updated at 12:13 p.m. ET

 

Stocks slumped Thursday as investors showed caution amid uncertainty surrounding the Federal Reserve’s potential plan to boost the economy.

 

At 12:13 p.m. ET, the Dow Jones Industrial Average ($INDU) was down by 56 points, or 0.5%, at 11,070. The S&P 500 ($INX) was down by 3.5 points, or 0.3%, at 1,179. The Nasdaq ($COMPX) was falling by 11 points, or 0.5%, to 2,492.

 

The Wall Street Journal reported Wednesday that the Fed was likely to purchase hundreds of billions of dollars of Treasurys to lower long-term interest rates and bolster the recovery. The estimate was lower than some forecasts and less than the $2 trillion of purchases the Fed enacted during the financial crisis, creating doubt among investors that the measures will be large enough to be effective.

 

"Expectations were very high for significant and immediate easing," said Mike Schenk, senior economist at the Credit Union National Association. "Those expectations have come down, and rightly so, the Fed wasn’t going to go in with guns blazing."

 

Investors sought safety in gold and Treasurys. The December gold contract added $21.60 to $1,344.20 an ounce. The benchmark 10-year Treasury note strengthened 16/32, diluting the yield to 2.670%.

 

Stocks surged earlier on news that initial weekly claims fell by 21,000 to 434,000 in the week ended Oct. 23, the lowest level in three months. Economists had expected claims to rise by 6,000.

The decline "doesn't change the fundamental outlook for the jobs market," Schenk said. "Consumers are still behaving cautiously and in the mode of deleveraging."

 

Although a falling U.S. dollar helped lift basic materials shares, weakness across conglomerates, transportation and tech stocks weighed on the market. 3M (MMM) and Cisco Systems (CSCO) were the Dow's biggest laggards, while American Express (AXP) and Merck (MRK) had the strongest gains.

 

Shares of 3M (MMM) were falling 4.5% to $86.32 after the company predicted it would earn as much as $5.74 a share this year, less than the earlier forecast of $5.80. The company's third-quarter earnings of $1.53 a share beat estimates by 2 cents. 

 

Exxon Mobil (XOM) reported better-than-expected adjusted earnings of $1.44 a share, topping estimates of $1.39. Revenue rose to $95.3 billion from $82.3 billion, which missed expectations for $98.1 billion. The stock was adding 1.5% at $66.61.

 

Shares of Motorola (MOT) were rising 6.1% to $8.58 after the company reported a third-quarter adjusted profit of 16 cents a share, topping expectations for earnings of 11 cents a share. Strong Android phone sales helped revenue rise 6% to a better-than-expected $5.8 billion.

 

Shares of Potash Corp. of Saskatchewan (POT) were falling 2.7% to $143.32 on concerns about BHP Billiton's (BHP) hostile bid to buy the company. Potash's third-quarter profit of $1.32 a share beat expectations of $1.16. Sales of $1.58 billion surpassed revenue expectations for $1.3 billion.

 

Dow Chemical (DOW) shares were falling 1.1% to $30.87 after the company reported third-quarter earnings of 54 cents  a share, beating estimates.

 

Colgate-Palmolive (CL) shares were down 1% at $74.75 after the consumer goods company's third-quarter sales of $3.94 billion missed expectations for $4.03 billion. The company's $1.21 per-share profit beat estimates and it forecast double-digit earnings growth for the year.

 

Drugmaker AstraZeneca (AZN) said its quarterly profit dropped after it set aside nearly half a billion dollars to settle claims of harmful side effects related to one of its anti-psychotic drugs. AstraZeneca shares were falling 1.5% to $50.17.

 

Microsoft (MSFT) will report quarterly earnings after the market closes. Analysts expect to see a profit of 55 cents a share, according to Briefing.com. The software maker's shares were rising 0.6% to $26.23.

 

The dollar was trading lower against a basket of currencies, with the dollar index down by 0.7%.

 

Crude oil for December delivery was gaining 10 cents at $82.04 a barrel.

 

The FTSE in London and the DAX in Frankfurt were gaining 0.4%. Hong Kong's Hang Seng climbed 0.2%, while Japan's Nikkei slipped 0.2%.

 

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163Comments
Oct 28, 2010 11:29AM
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Ignatius... 

 

So you want everyone to pay their fair share?   That MUST mean you want them to pay EQUAL shares...  But somehow, like all socialists and liberals, you view some as more equal than others, and thus you proabably feel you should pay less than Warren Buffett...  

 

Typical liberal crap, about fairness...  But they want to decide who should be treated UNEQUALLY... 

 

Come back and try an argument where fair mean equal, instead of some liberal deciding someone else should buy something for someone that cannot afford it...

 

Jes, are all Donkeys such Marxists?  Do they all believe they can confiscate private property because someone else wants/needs it?  

 

Nov 2nd cannot get here fast enough...

Oct 28, 2010 10:52AM
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Jes, Deklen...

 

I always new you were a Donkey hack.  But how you can support a dumb, corrupt, Chicago machine party hack like Obama is beyond not having a brain.

 

I know you prefer the socialist democratic ideas of Karl Marx...  Take from the evil rich (Hitler blamed the evil jews) so you can give to your special interests...

 

But to actually siupport the likes of Pelosi, Reid and Obama means you truely are either a Marxist, Nazi or just plain stupid... 

 

As Obama says....good luck in all 57 states...  Can you say DUMB?

Oct 28, 2010 10:29AM
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I'm sick of hearing the word "unexpectedly".  There are approx. 8 million people drawing UI benefits.  It was around 9 million a few months ago.  The good news is that new unemployment claims have dropped.  As the months go by - as people drop off UI - they are no longer counted.  This means that,  while it may make people that participate in the stock market happy and paint a rosy picture, basically the economy is not getting better as fast as the figures portray.  UI benefits will end on Nov. 30th if Tier V is not enacted.  At that point any person that has drawn at least 26 weeks of UI will be dumped.  We're talking 8 million people (trying to take care of themselves/children/elderly) that will be without income.  Those people will lose their homes, default on any debt they have (which will be quite a bit since many have been unemployed for more than a year) and will probably be heading down to the food stamp line. 

Oct 28, 2010 11:01AM
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Cowboy.... I have my 12th grade education, unfortunately is was in Chicago Public schools, so I blame them for my 4th grade education.   I did however PAY for a 12th grade eductation...

 

You seem to hate legal entities, which corporations are.  You must be a liberal against FREE speech.  How dare corporations (or unions) voice their opinions or spend their money on trying to unelect those that cause them economic harm...

 

We can see how well the last 2 years (4 years of controlling Congress) have improve dthings...

 

The definition o fstupidity is doing the same thing over and over again and expecting different results...

 

Voting Democrat is about wanting out of control spending, deficits and high unemployment...

 

How is that "hope and change" thingy working out for ya?   You certainly seem happy and have no complaints...

 

 

Oct 28, 2010 10:43AM
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Colorado, you truely are have not a clue...

 

How many people do you employ?   Corporations look out for themselves just as you or I do.   Here in Illinois, it costs me 66,500 a year to hire a person for 44,000 a year.  This means that I must pay 22,500 extra for government mandated benifits and other items besides a pay check.   This number has almost doubled in the last 4 years.   I have INCENTIVE not to hire, provided by the government.  I also MUST keep wages lower to pay this costs.  Think of it as a payroll tax that you and my customers must pay.  

 

My question to you is why should I PAY the tax?   I should just make all the employees pay the tax, maybe then they would stop the Donkey party from wanting to TAX evil corporations...

 

But fear not, the Democrats have given me the answer...Layoff workers, or send the jobs overseas...

I will dutifully comply with their incentives...

Oct 28, 2010 10:37AM
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Don't alays believe what you hear from the media. They don't always have all the exact facts. You need to get them from some other inside track where they know what they are really talking about and know for sure. This country is going down hill. Believe me we haven't seen the storm yet. It is just brewing. Pay attention to what is going on each and every day. That tells you alot also. My motto is don't go totally by hear say in public go by actual facts in sight.
Oct 28, 2010 10:36AM
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Sigh...

 

All in all a better number for filing new claims.  However, more telling is the U6 number.  It increased from 16.8% to 17.1%.  This number is much more important.   It is good however that some temporary retail jobs were created.

 

But come the 1st of the year, things will get worse...  new taxes and healthcare law provisions will substantially increase unemployment.   But there will be hope.  60-100 Donkeys will be unemployed!

 

How any working person can vote Democrat is beyond me.   They seem to hate the middle class.   They are trying to bring the middle class into the poor... 

 

Vote the Donkeys out Nov. 2nd...

Oct 28, 2010 10:24AM
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Yup, I called it about a month ago when it was "dropping" ya right,it was at 9000 and I said "watch  right before ELECTION IT GO SKY HIGH.

Well what do you know......it's climbing, do not be fooled by this game the gov't plays.

I said it would hit 14,000 by Election so lets just watch.

This has nothing to do with jobs, housing, it's all BS trying to make YOU believe we are on our way to recovering, aka they are ALL LIARS.

 

Oct 28, 2010 10:21AM
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Why is it always unexpected? Whether they go up or down, the "experts" are always surprised.
Oct 28, 2010 10:00AM
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First-time unemployment claims fall unexpectedly. The key word here is claims. This means some unemployed people ended their UI and are no longer on the radar, like me. Mine ended two weeks ago. This is total BS.
Oct 28, 2010 9:59AM
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Can someone please explain how only 434,000 people filing for unemployment is good news?
Oct 28, 2010 2:14PM
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I am small business owner...

 

Let tell you about illegals...

 

First some scope...   116 employees...  1 HR person...

 

I've been sued for requiring proof of citizenship in the form of a passport...  Not by the job seeker, but the US dept of labor...

 

I instituted this policy because I had hired 1 illegal, and when I was informed by Social Security the number was bad, I decided to call ICE.   No response.  I then examined the document photocopies he submitted.  I was told the documents were forged.  So I fired the employee...  In the mean time I was fined for hiring an illegal, even though I fired him.

 

I still require a valid US passport.  I won that case.

 

I don't want illegals.  I want coherent ENGLISH speakers.  On the job, ENGLISH is the only language allowed.  Next I want reliable, people than want to work, and are smart enough to follow directions.

 

I will tell you this, half the people that were laid off were the ones that had many unexcused absenses...

 

 

Oct 28, 2010 11:57AM
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deklen - 

Which one of the many posts that make fun of you were you referring to?
Oct 28, 2010 11:41AM
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All these Democrats complaining about Obama's policies destroying jobs...

 

Why don't they just go and start their own business?   LOL  They know as much about running a business as Obama does...diddly squat... 

 

Maybe its the anti-business polices STUPID.   Business' hire when they can make money off your labor.   Why else would anyone risk hiring?

 

I can see most Democrats are completely clueless...

Their TAX, BORROW and SPEND policies are destorying the private sector and growing the government sector...

 

We need to do the opposite...

Oct 28, 2010 10:56AM
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Veijo, it interesting that Food, taxes and gasoline ar enot included in the CPI...

 

Get real, prices are up everywhere...  And commodity prices for business are sky high...  But I guess that is more from Obama destorying the dollar...

 

Did you know that the Canadian dollar is worth miore than the US dollar?

 

A 1964 silver dime is now worth 1.75!  Print away Obama & Bernache...   Massive inflation is needed to pay for Obama's spending spree...

Oct 28, 2010 10:41AM
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Only 434,000 jobs lost in one week.

At best this can be characterized as a decrease in the increase.

How many weeks before there are NO jobs left? 

 

 

Stock market up.  Which of the companies whose stock gained manufacture products in the US? 

Many companies stock went up because they sold more of their Chinese-made products.

Oct 28, 2010 10:36AM
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The only reason unemployment rates fell is because more people have exhausted their benefits. Those extensions only apply to those who have not used up their benefits or any other previous extension. 
Washington state is at 9.0 for the month of September. 
There have been way less positions to apply for in the last 3 weeks than in any week since I have been unemployed since Mar '09 upon graduating from my certification program.
We have parks that have no funding with homeless living in tents. Not deadbeats, not drug addicts but regular normally productive people/families..
With the exception of those who are wealthy or have solid job security it is only getting worse for the rest of us. 
Oct 28, 2010 9:56AM
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The Fed is propping up the Stock Market! Without Helicopter Ben and his boys intervention and manipulation, we would be in a Major Crash already! Get ready for the next 60 days! Happy Turkey Day and MERRY CHRISTMAS !
Oct 28, 2010 2:17PM
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Mirage, a think a lot of companies used the economic down turn to cleanse themselves of the misfits. The only penalty is that SUI rates go up.
Oct 28, 2010 1:56PM
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Complete speculation.  Bought some OCLR today.  It feel off the cliff, 2nd biggest decliner today.  I usually find they over due the bad news.  Who knows?  Still fun for me.  I love a stray.  Off to "pump some iron."
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