Stocks tumble as the ECB fails to impress traders

Updated: 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-expecte​d 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-expecte​d 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-quarte​r 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)