Stocks tumble as the ECB fails to impress traders

The Dow falls 92 after falling as many 192 pionts. Traders are unhappy after the European Central Bank doesn't offer big moves to save the euro. Knight Capital may need help after losses from market glitch. Some retailers had a strong July.

By Charley Blaine Aug 2, 2012 12:03PM
Charley BlaineUpdated: 6:24 p.m. ET

What Mario Draghi giveth -- or what traders thought he giveth -- he can also taketh away. And that's what the president of the European Central Bank did today. A week after promising big action to support the euro, he disappointed markets.  

The European Central Bank didn't cut its key interest rate. More important, the ECB didn't announce a big plan to save the euro, although Draghi had vowed a week ago that one is coming.

So, U.S. stocks fell for the fourth day in a row, although the market recovered roughly half its losses for the day. The sell-off came despite decent July sales from a number of big retailers, including Target (TGT), Macy's (M), Nordstrom (JWN), Ross Stores (ROST) and TJX Companies (TJX). Shares for all were higher.

European stocks weren't so lucky. They sold off, with German and French stocks off more than 2%. Spanish stocks fell more than 5%. The dollar is higher -- and the euro lower -- as investors flee Europe and buy U.S. Treasury securities. Meanwhile, U.S. jobless claims rose slightly in the latest report, increasing some worries about Friday's big jobs report.

The Dow Jones industrials ($INDU) closed down 92 points to 12,879. The blue chips had been down as many as 192 points. The Standard & Poor's 500 Index ($INX) dropped 10 points to 1,365, and the Nasdaq Composite Index ($COMPX) was off 10 points to 2,910.

Article continues below.
The Nasdaq-100 Index ($NDX) was off 10 points to 2,626. Apple (AAPL), the biggest influence on the index, finished up 98 cents to $607.79 after trading lower for much of the day.

The Dow's close was its seventh loss in the last 10 sessions; the S&P 500 and Nasdaq have experienced eight losses in the same period. The two up days for the S&P 500 and Nasdaq came Thursday and Friday after ECB President Draghi had promised major support for the euro.

Because of the Draghi rally, the Dow is off just 0.5% in those 10 sessions, with the S&P 500 and Nasdaq off 0.8% and 1.9%, respectively. The Draghi rally added nearly 400 points over those two days.

Energy prices -- New York close



Thur.

Wed.

Month chg.

YTD chg.
Crude oil (-CL)

$87.13

$88.91

2.55%

-11.84%
(per barrel)











Heating oil (-HO)

$2.8423

$2.8588

4.89%

-2.47%
(per gallon)











Natural gas (-NG)

$2.9200

$3.1710

3.40%

-2.31%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.8696

$2.8342

9.04%

7.99%
(per gallon)











Brent crude 

$105.90

$105.96

8.28%

-1.38%
(per barrel)











Retail gasoline

$3.3540

$3.5210

0.51%

2.38%
(per gallon; AAA)












What to watch with the jobs report
Friday's jobs report, due at 8:30 a.m. ET, is likely to show two things: Some 100,000 new jobs were created overall, but the unemployment rate will probably continue to be stuck at 8.2%.

A significant shortfall of the payroll number (as well as private-sector employment) may put pressure on stocks again for a fifth day. And it will increase pressure on the Federal Reserve to do something to add more stimulus to the economy. The Fed held steady at its meeting on Wednesday.

Two reasons the unemployment rate has been stuck: Construction employment hasn't begun to recover from the housing bust, and state and local governments have been forced to chop payrolls to balance budgets.

One potentially negative factor for the economy was taken off the table on Wednesday when House and Senate leaders settled on a deal to keep the government running through March, preventing it from shutting down when the fiscal year ends on Sept. 30.

After the close, American International Group (AIG), the insurer majority-owned by the U.S. Treasury, said profit increased 27% on investments and improvements at its property-casualty unit. The company earned $2.33 billion, or $1.33 a share, up from from $1.84 billion, or $1 a share, a year ago. Operating profit, which excludes some investment results, was $1.06 a share, beating the Street estimate of 60 cents.

Facebook (FB) shares were up slightly to $20.16 after hours. They had fallen to as low as $19.82 before finishing at $20.04. The company disclosed it had identified at least 87 million fake accounts out of 955 million it had records on. The company's shares have suffered since its initial public offering as results haven't impressed because of problems getting ads onto its mobile site and executives have left the company. A number of early investors, including Fidelity, have sold their positions.

Energy shares pull market lower
Energy and materials stocks, weighed down by lower commodity prices, were the market's weak links as nine of 10 sectors of the S&P 500 were lower. Consumer discretionary stocks, thanks to the retail sales, were higher.

Only three of the 30 Dow stocks were higher: Wal-Mart Stores (WMT), Caterpillar (CAT) and McDonald's (MCD). Only 105 S&P 500 stocks were higher, along with 28 Nasdaq-100 stocks. First Solar (FLSR) and Tesoro Petroleum (TSO) were the leaders. Green Mountain Coffee Roasters (GMCR) was the Nasdaq-100 leader, up $4.75 to $22.66.

Gold, crude oil and especially natural gas fall
Crude oil (-CL) and gold (-GC) are lower because of concerns Europe is slowly sinking into a continent-wide recession. Crude settled down $1.78 to $87.13 a barrel in New York, down $1.78.

Natural gas (-NG) futures were down 25.1 cents, or 7.9%, to $2.92 per million British thermal units after the Energy Department reported a larger-than-expected increase in the domestic supply of gas.

The national average retail price of gasoline was $3.354 a gallon, according to AAA's Daily Fuel Gauge Report, up from Wednesday's $3.521 a gallon.

Gold settled down $16.60 to $1,590.70 an ounce. Copper (-HG) and silver (-SI) also were lower.

A crisis at Knight Capital Group
The market loss was exacerbated by Wednesday's big glitch that caused wild volatility among some 148 stocks.

Knight Capital Group (KCG), where the problem originated, saw its shares fall $4.36 to $2.58, a new all-time low. The company said today an erroneous trading position wiped out $440 million of its capital and will force the firm to raise money. The Wall Street Journal reported the company is talking to Virtu Financial about a capital infusion, and it is seeking funding from JPMorgan Chase.

The losses are greater than the company’s revenue in the second quarter of this year, when it brought in $289 million.

A bug in an automated stock trading program at Knight flooded the market with millions of trades on Wednesday. It caused turmoil across Wall Street and drew renewed attention to the fragility and instability of the nation’s stock markets.

Knight is a big market maker and executes trades for retail brokerages like Scott Trade, TD Ameritrade, Fidelity and Vanguard.

What did the ECB accomplish?
A week after ECB President Draghi said he'd do "whatever it takes" to save the euro, he couldn't deliver enough today.

He hinted that the ECB could soon start buying up bonds of weak European nations, like Spain and Italy. It called on European governments, as The Wall Street Journal noted, to activate the region's bailout funds, the European Financial Stability Facility and the European Stability Mechanism, to buy sovereign bonds when market circumstances are exceptional. But he stressed that support for governments should be tied to strict conditions. 

The ECB staff is going to work on more ideas to keep Europe afloat.

What Draghi offered was technical and wonky, and it didn't help.

"Draghi didn't say anything that excited us, and he set us up like a poker room full of suckers. Investors are angry, traders are angry," Todd Schoenberger, managing principal at the BlackBay Group in New York, told Reuters.

GM sees a smaller-than-expected loss in Europe
General Motors (GM) shares were off 52 cents to $19.14 The auto giant's second-quarter results were better than expected after posting a smaller-than-expected loss in Europe.

GM earned $1.49 billion, or 90 cents a share, down 41% from a year ago's $2.52 billion, or $1.54 a share. Analysts had expected 74 cents a share.

Revenue was off 4.6% to $37.6 billion. Much of the decline was due to the rising dollar, which depressed the value of sales in Europe and elsewhere.

The loss in its European operations came to $361 million, less than the expected $461 million.

GM also managed to keep profits up by reallocating advertising spending around the Olympics, delaying some engineering costs for a redesigned line of large pickups.

Shoppers like a bargain
Higher-than-expected sales at low- and midpriced stores helped push sales past analysts’ estimates.

Sales at stores open at least a year rose 4.3% in July at the 20 stores tracked by Thomson Reuters, well above expectations of a 1.5% gain.

That is a good sign as retailers head into the important back-to-school months of August and September, Chris Donnelly, global industry managing director for retail at the consulting firm Accenture, told The New York Times.

Midrange stores, including Target, Costco (COST), Kohl’s (KSS) and Macy’s, all reported comparable sales above analysts’ expectations. But executives remained cautious, like Macy's CEO Terry Lundgren, who said he was seeing "some challenges from a sluggish macroeconomic environment."

One big miss was Aeropostale (ARO), whose sales fell 1% from a year ago. The company now expects to break even when it posts second-quarter earnings results on Aug. 16. It had said it expected to earn 3 to 5 cents a share. Shares fell $6.37 to $13.08.

Also slumping was Abercrombie & Fitch (ANF), off $4.96 to $29.06. The teen retailer warned that fiscal-second-quarter earnings would be 15 to 18 cents a share. Analysts had been looking for 25 cents. Comparable sales were off 10% from a year ago. The big problem is Europe, where sales fell 25%.

Short hits from the markets -- New York close



Thur.

Wed.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0900%

0.090%

-10.00%

800.00%
5-year Treasury note 

0.611%

0.643%

2.00%

-26.39%
10-year Treasury note

1.478%

1.539%

-10.91%

-21.00%
30-year Treasury bond

2.547%

2.614%

-7.82%

-11.84%
Currencies











U.S. Dollar Index

83.451

83.178

2.08%

3.64%
British pound

1.5555

1.5545

-0.95%

0.11%
(in U.S. $)

 








U.S. $ in pounds

£0.643

£0.643

0.96%

-0.11%
Euro in dollars

$1.22

$1.22

-3.24%

-5.73%
(in U.S. $)

 








U.S. $ in euros

€ 0.819

€ 0.817

3.35%

6.08%
U.S. $ in yen 

78.43

78.43

-1.65%

1.73%
U.S. $ in Chinese

6.39

6.36

0.26%

1.00%
yuan











Canada dollar

$0.996

$0.995

1.39%

1.54%
(in U.S. $)

 








U.S. dollar 

$1.005

$1.005

-1.37%

-1.52%
(in Canadian $)

 








Commodities

 

 

 

 
Gold (-GC)

$1,590.70

$1,607.30

-0.84%

1.53%
(per troy ounce)

 








Copper (-HG)

$3.291

$3.375

-5.89%

-4.23%
(per pound)

 








Silver (-SI)

$26.9950

$27.5350

-2.23%

-3.30%
(per troy ounce)

 








Wheat (-ZW)

$8.6500

$8.7950

14.23%

32.52%
(per bushel)

 








Corn (-ZC)

$7.9575

$8.005

25.36%

23.09%
(per bushel)

 








Cotton 

$0.7097

0.7056

-0.50%

-22.59%
(per pound)

 








Coffee

$1.7165

1.746

0.56%

-25.26%
(per pound)

 








Crude oil (-CL)

$87.13

$88.91

2.55%

-11.84%
(per barrel)










 

357Comments
Aug 2, 2012 12:25PM
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Wall street is wanting more welfare payments for its bad business decisions.
Aug 2, 2012 12:55PM
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Face it people this is all a joke. The only way anything will ever get better is if the cost of goods gets straightend out. Another stimulus will just make the rich even richer and then all the commodities will go back up and the economy will not get better. I am sick and tired of hearing about stimulus and hopes. Until people get back to work nothing will get better.
Aug 2, 2012 12:21PM
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Hang tough until November, we will get this country back on track.  Mila and Michelle have enjoyed their last 29 million dollar tax payer trip to Mexico.
Aug 2, 2012 12:47PM
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They are the smartest people in the world, they give you news, and they made a ton of cash... they give you more news after they have taken profits, and the stocks drop.. in a week they will give you news again and the stocks will run, and they will make money hand over fist...These are facts... the haves vs the have nots....sure you could invest and make a few bucks, but no where in the realm that they are making, and by the time you end up getting out, you will lose more than you gain... they on the other hand know EXACTLY when to get out, so they always make money... they are in fact the one's giving the news... and if you think insider trading laws stop these people... YEAH RIGHT....the SEC is on their side... 
Aug 2, 2012 12:39PM
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Gee, that's kind of funny when last week this same moron (Mario Draghi) "pledged" that the ECB would get better and the market "soared" 200+ points based on his HOT AIR or lies.  Today it's down 130 points on news the ECB is not announcing a "big plan" to save the euro.  In basic laymen terms folks "bend over, drop your pants and wait for something to poke you in the you know where"...what a bunch of dummies running the world's economies.
Aug 2, 2012 12:49PM
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Looks like the wall street cesspool bottom feeders are really pissed off now...... Both the FED and the ECB refuses to feed these crooks anymore. Poor things - there must be some way we can put them out of their misery. Any ideas out there? 
Aug 2, 2012 1:54PM
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How long are they going to recycle the "Eurozone worries" stories?  Seriously, enough already.  These Wall Street bozos just make stuff up to move the market up or down.  It must be terribly frustrating to have the majority of people ignore you like 'the little boy that cried wolf'.  These jerks are competing against themselves with your pension money.  Demand better, demand these losers be put in jail; and send Congress along with them.  Insider trading is illegal.
Aug 2, 2012 3:11PM
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Obama, July 26, 2012: "We’ve tried our plan, and it worked!”

 

Most people think Obama was lying when he made that statement.  I think Obama was actually telling us the truth.  They tried their plan,.....and it's working! 

 

He just didn't tell us which "plan" he was referring to. 

 

He told us in 2008 that his "plan" was to "fundamentally change America",......and it's working!  He's fundamentally changing America!  But we're not going to like the "change" he's giving us,....... and we aren't smart enough to recognize it until it's too late.   

Aug 2, 2012 3:25PM
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BREAKING NEWS!! BREAKING NEWS!! BREAKING NEWS!!!

it seems ANOTHER California city files for bankrupcty, let's see now, who's the dominating factor in this? ummm oh that's right, the democraps, they run Cali and look what's happening, one after another cities are going bankrupt and all I gotta say is GOOD!!! that's what u idiots in Cali get, keep voting democrap, they'll take all ur money and blow it on themselves and their cronies!! that's what u get, u need to get punished and punished is what ur getting, BIG TIME!!!

 

now u loonies on the left tell me again how capitalism is the epitome of corruption, seems to me ur sleezy socialist/communist utopia is the very definittion of corruption, now I'm off to Chick fila excuse me....

Aug 2, 2012 2:09PM
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I think it's got a long way to go - down.

Click thumbs up if you think the market is still too high. Click thumbs down if you disagree.

Aug 2, 2012 1:56PM
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Oh Americans, we cannot allow this to go on! Seriously.............Obama has to go!!!!
Aug 2, 2012 3:31PM
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Most people recognize the fact that potus is or at least heavily sympothizes with marxist ideology. It is in his books, his speeches and his policies. If you can't recognize it, then you are part of it. As the saying goes, fish are the last ones to notice that they are in water... If you are not willing to accept that potus has these sympathies you are nothing but a shill for the left, a useful idiot as Lenin would say...

Aug 2, 2012 12:44PM
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all the major discount stores show a profit and this is a good thing ? All it proves to me and anyone else smart enough to figure out is that people out there need clothes for their family but have to buy it from discount stores .
Aug 2, 2012 12:32PM
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Glad they didn't print again. The market assumes they would, so I'd expect a few days of selling.
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What the hell is going on with gas prices??!!! When oil is sitting at rough $87 and change, the price per gallon should be no more than $3 and change in the Chicago area and suburbs. I don't understand how oil goes up a few buck and the price at the pump goes up $.10 to $.20 a gallon!! Gas is as high as $4.09 in some suburbs of Chicago with no justification!! When the price per barrel lowers, you never see the drastic decreases as you do the increases!!! We need to make a statement to the big oil companies that enough is enough! Make sure that everyone considers this at election time. We have enough oil in the US to last for generations. We could be the richest Nation in the World but we choose to increase our dept to the point that we can't pay it off!! Bring back morales and ethics from the good old days. It's sad to see where the US is heading. We need to take control! Get rid of the old politics and elect the new younger ones with new and bright ideas. It couldn't hurt. Thanks for letting me vent.

 

God bless America!!

 

 

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For Endeavor below:

 

Some Interesting Facts about Romney:

Bain Capital, starting with one small office supply store in Massachusetts, turned it into Staples; now over 2,000 stores employing 90,000 people.

Bain Capital also worked to perform the same kinds of business miracles again and again, with companies like Domino's, Sealy, Brookstone, Weather Channel, Burger King, Warner Music Group, Dollarama, Home Depot Supply, and many others.

He was an unpaid volunteer campaign worker for his dad's gubernatorial campaign 1 year.

He was an unpaid intern in his dad's governor's office for eight years.

He was an unpaid bishop and stake president of his church for ten years.

He was an unpaid President of the Salt Lake Olympic Committee for three years.

He took no salary and was the unpaid Governor of Massachusetts for four years.

He gave his entire inheritance from his father to charity.

Mitt Romney is one of the wealthiest self-made men in our country but has given more back to its citizens in terms of money, service and time than most men.

And in 2011 Mitt Romney gave over $4 million to charity, almost 19% of his income.... Just for comparison purposes, Obama gave 1% and Joe Biden gave $300 or .0013%.

Mitt Romney is Trustworthy:

He will show us his birth certificate

He will show us his high school and college transcripts.

He will show us his social security card.

He will show us his law degree.

He will show us his draft notice.

He will show us his medical records.

He will show us his income tax records.

He will show us he has nothing to hide.

Mitt Romney's background, experience and trustworthiness show him to be a great leader and an excellent citizen for President of the United States.

You may think that Romney may not be the best representative the Republicans could have selected. At least I know what religion he is, and that he won't desecrate the flag, bow down to foreign powers, or practice fiscal irresponsibility. I know he has the ability to turn this financial debacle that the current regime has gotten us into. We won't like all the things necessary to recover from this debt, but someone with Romney's background can do it. But, on the minus! side, He never was a "Community Organizer", never took drugs or smoked pot, never got drunk, did not associate with communists or terrorists, nor did he attend a church whose pastor called for God to damn the US.

Aug 2, 2012 2:07PM
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This is the slowest recovery we have ever had in history... 41+ months of unemployment over 8% -- and if they were using the real unemployment numbers, that rate would be over 10%. They have told us just recently that the decline in unemployment was not due to job creation, but, rather people dropping off the unemployment rolls.
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It seems that the big controversy is "where are all of Romney's tax returns" ................. but shouldn't the question be:

After all government handouts, did Obama ever pay ANY taxes, because there is little doubt that Romney has paid a minimum of 1000x (maybe 100,000X)  what Obama and his mom and all his illegal family TOGETHER has ever paid!

Aug 2, 2012 12:59PM
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Stocks Tumble as European hopes dashed...

 

Revise headline to:

 

ANOTHER LIE FROM BUMBLING CENTRAL BANKER HAS INVESTORS SCRAMBLING TO CORRECT THEIR PARLAY CARDS FROM A WEEK AGO.

 

They can drop dead for all I care...the bid up in Pump Gas was the latest scumbaggery to come out of FRAUD STREET.

Aug 2, 2012 2:46PM
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The headline should read:
"Stocks tumble as greed, manipulation and corruption continue with no end in sight".
This is a joke that is killing any chance the working middle class has of building any kind of retirement as they steal from our 401K's and IRA's... It has to stop !!!
The ONLY reason my 401K is climbing at all is bacause I'm dumping the maximum allowable into it.
Otherwise it would be flat for negative for the last ten years...
This is criminal what they are doing and they all need to be prosecuted for it.  
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