Dow drops 95 as gold tops $1,600

But stocks reclaim much of their early losses set off by worries about European banks and US budget battles. IBM boosts guidance; shares rise. Gold has its first close above $1,600; silver jumps 3.3%. Apple hits a new high.

By Charley Blaine Jul 18, 2011 12:50PM
Charley BlaineUpdated: 11:41 p.m. ET

Traders came back from the weekend today and hated what they saw from Europe and from budget negotiations in the United States. So they sold just about everything -- except gold (-GC), silver (-SI) and Treasury securities.

Gold topped $1,600 an ounce for the first time, silver topped $40 an ounce for the first time since early May. And the Standard & Poor's 500 Index ($INX) briefly dropped below 1,300 for the first time since June 28. But bargain hunting and short-covering trimmed losses substantially this afternoon.

After the close, IBM (IBM) beat Street estimates with its second-quarter results and boosted its full-year earnings guidance to at least $13.25 a share from $13.15. Shares were up 1.8% to $178.50 after falling 0.2% to $175.28 in the regular session.

The Dow Jones industrials closed down 95 points, or 0.8%, to 12,385; the blue chips had been off as many as 183 points. The S&P 500 was off 11 points, or 0.8%, to 1,305. The Nasdaq Composite Index ($COMPX) was down 25 points, or 0.9%, to 2,765. The Nasdaq-100 Index ($NDX.X) dropped 13 points, or 0.5%, to 2,344.

Article continues below.
All but one of the 30 Dow stocks were lower. The best performer was Chevron (CVX), up slightly to $106.23, followed by McDonald's (MCD), down 0.1% to $85.40, and IBM. Only 40  S&P 500 stocks were higher, along with just nine Nasdaq-100 stocks.

Gold reached as high as $1,607.90 an ounce before settling at $1,602.40, up $12.30, in New York. Silver was up $1.271 to $40.342 an ounce, a gain of 3.3%. Crude oil (-CL) settled down $1.31 to $95.93 a barrel after dropping to as low as $94.69.

As some investors moved into shorter-term Treasurys, the dollar rose against major currencies. That hit shares of export-oriented companies like Boeing (BA), Caterpillar (CAT) and 3M (MMM), which were among the Dow's worst performers today.

Futures trading suggests stocks will open modestly higher. The day will feature the government's monthly report on housing starts.  Apple (AAPL) and three Dow companies are among companies reporting quarterly results: Bank of America (BAC), Coca-Cola (KO) and Johnson & Johnson (JNJ).

IBM brings some smiles after tough day
IBM earnings rose 11% to $3.09, after one-time charges, and revenue was up 12.4% to $26.67 billion. Analysts had expected $3.03 a share on revenue of $25.4 billion in revenue.

Fueling the gains were stronger computer hardware and software sales, although much of the gains were the result of a falling dollar. Still, the company's backlog of service contracts rose 11.6% to $144 billion, which was why Big Blue was able to boost guidance.

IBM sets up fiscal-third-quarter earnings from Apple, due after Tuesday's close. The stock was today's big safe haven, hitting a new all-time high of $374.65 and closed up 2.4% to $373.80.

The Street expects earnings of $5.80 a share, up 65% from a year ago, with revenue up 58.7% to $24.92 billion. "Get reacy for the return of the wow factor," said JPMorgan analyst Mark Moskowitz in a note to investors.

Apple was the third-best S&P 500 performer and second-best among Nasdaq-100 stocks after Check Point Software Technologies (CHKP)

Energy prices -- New York close



Mon.

Fri.

Month chg.

YTD chg.
Crude oil (-CL)

$95.93

$97.24

0.53%

4.98%
(per barrel)











Heating oil (-HO)

$3.0777

$3.1180

4.46%

20.99%
(per gallon)











Natural gas (-NG)

$4.5460

$4.5460

3.93%

3.20%
(per mil. BTU)











Unleaded gasoline (-RB)

$3.0974

$3.1293

4.32%

26.26%
(per gallon)











Brent crude 

$116.05

$117.26

3.17%

22.48%
(per barrel)











Retail gasoline

$3.6760

$3.6760

3.81%

19.66%
(per gallon; AAA)












US budget battles, European bank health weigh on markets
The catalysts for the selling were unhappiness with results of stress tests of major European banks and worries that the United States was headed to a default on its debt because the Obama administration and Republicans can't agree on a plan to raise the U.S. debt ceiling.

"It looks like more partisan fighting is delaying any debt-ceiling resolution," Larry Peruzzi, senior equity trader at Cabrera Capital Markets in Boston, wrote in an e-mail. "Words being thrown around like 'catastrophe' and 'Armageddon' are certainly not soothing investors' confidence."

House Speaker John Boehner, R-Ohio, said his party wouldn't accept any tax increases as he worked on a deal to lower the deficit. As negotiators near the Aug. 2 deadline for raising the $14.3 trillion U.S. debt ceiling, President Obama is pushing to close tax loopholes for the richest Americans and corporations and cut discretionary spending by government.

In Europe, only eight banks actually failed the test -- two from Greece, five from Spain and one from Austria.

The issue was that the tests appeared to be too lenient for many analysts. And Bloomberg News suggested that European banks may have to raise as much as 80 billion euros ($112 billion) of additional capital to make investors happy.

The eight banks that failed out of the 90 tested on July 15 had only a combined capital shortfall of 2.5 billion euros ($3.5 billion), the European Banking Authority said July 15. As many as 20 banks need to bolster capital, JPMorgan Cazenove analysts wrote in a report after the results were published late Friday.

Will Bank of America need more capital?
Banks were especially wea. Bank of Americaexpected to report a big loss on Tuesday, hit a new 52-week low of $9.53 before recovering to $9.72. Investment bank Morgan Stanley (MS), which reports on Thursday, fell to as low as $20.18 before covering to $20.69.

Bank of America was the worst Dow performer today.  The banking giant may have to build its capital cushion by $50 billion and renege again on CEO Brian Moynihan’s pledge to raise the firm’s dividend as mortgage losses mount.

Bank of America and Morgan Stanley weren't the only bank stocks to be slammed.  Goldman Sachs (GS), which reports results Tuesday, Comerica (CMA), Barclays (BCS) and Northern Trust (NTRS) also were hitting 52-week lows.

Shares of Charles Schwab (SCHW) were down 0.3% at $14.97 after the brokerage and money-management company topped second-quarter profit estimates by a penny with earnings of 20 cents a share.

Halliburton earnings jump; shares drop
For much of the day, Halliburton (HAL) shares couldn't avoid the selling. But the stock closed up 0.1% to $53.12. The oil-services giant said stronger demand and improved margins resulted in second-quarter earnings that jumped 54% year over year.

The company earned $739 million, or 80 cents a share; the Street was expecting 74 cents a share. Revenue was up 35% to $5.9 billion. Margins may grow more slowly in the third quarter because of cost inflation and a slowdown in the recovery in the Gulf of Mexico.

News Corp. shares drop as hacking scandal widens
Shares of News Corp. (NWSA) fell 4.3% to $14.97; the shares had been as low as $14.76. A second senior British policeman resigned today over the corruption scandal that has engulfed Rupert Murdoch's global media empire and forced Prime Minister David Cameron to defend his own position.

Plus Standard & Poor's said it may downgrade the stock.

Scotland Yard's counterterrorism chief, John Yates, quit a day after the head of the Metropolitan Police. The force faces a storm of questions from Parliament and voters over officers' relationships with the Murdoch press and their failure to probe allegations of phone hacking by the News of the World, the British tabloid shut down after its July 10 edition.


Following the arrest Sunday of Murdoch's British newspaper chief, Rebekah Brooks, a personal friend of Cameron's and one of two top News Corp. executives to resign on Friday, the Murdoch family's management of its global business interests was also being questioned by investors.

 

The company said it was setting up an independent ethics committee under Anthony Grabiner, a commercial lawyer and member of the House of Lords.


CEO Rupert Murdoch, 80, and his son and heir apparent James, 38, along with the 43-year-old Brooks, a former editor of the News of the World, will be quizzed by the media committee of the lower house Tuesday in what promises to be a fiery showdown.


Since July 5, News Corp. shares have fallen 18.2%.


Mortgage insurers get creamed
MGIC Investment (MTG) led a mortgage insurer slump after the company swung to a second-quarter loss as fewer borrowers caught up on overdue loans.

MGIC, the largest U.S. mortgage insurer, dropped 23% to $4.62 No. 2 Radian Group (RDN) fell 13.8% to $3.50. PMI Group (PMI) dropped 12.6% to $1.11.

MGIC pays lenders when homeowners default and foreclosure fails to recoup costs, and losses swelled as the housing market slumped. MGIC lost $151.7 million, or 75 cents a share in the second quarter, its 15th unprofitable period in 16 quarters. The loss was eight times bigger than the Street estimate.

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

Fri.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.010%

0.030%

-50.00%

-91.67%
5-year Treasury note 

1.426%

1.439%

-18.70%

-29.27%
10-year Treasury note

2.909%

2.908%

-7.88%

-11.98%
30-year Treasury bond

4.288%

4.251%

-2.15%

-1.70%
Currencies







 

 
U.S. Dollar Index

75.793

75.562

1.55%

-4.41%
British pound

$1.6051

$1.6124

0.16%

2.86%
(in U.S. $)











U.S. $ in pounds

£0.6230

£0.6202

-0.16%

-2.78%
Euro in dollars

$1.4094

$1.4130

-2.68%

5.34%
(in U.S. $)











U.S. $ in euros

€ 0.7095

€ 0.7077

2.75%

-5.07%
U.S. $ in yen 

79.24

79.07

-2.06%

-2.61%
U.S. $ in Chinese

6.49

6.46

0.49%

-1.84%
yuan











Canada dollar

$1.043

$1.048

0.51%

3.93%
(in U.S. $)











U.S. dollar 

$0.960

$0.954

-0.51%

-3.78%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,602.40

$1,590.10

6.63%

12.73%
(per troy ounce)











Copper (-HG)

$4.4030

$4.4130

2.81%

-0.99%
(per pound)











Silver (-SI)

$40.3420

$39.0710

15.82%

30.40%
(per troy ounce)











Wheat (-ZW)

$6.8950

$6.9475

17.91%

-13.19%
(per bushel)











Corn (-ZC)

$6.9625

$7.0125

10.69%

11.85%
(per bushel)











Cotton 

$0.9795

$1.0146

-38.70%

-32.36%
(per pound)











Coffee

$2.4820

$2.5355

-6.46%

3.20%
(per pound)











Crude oil (-CL)

$95.93

$97.24

0.53%

4.98%
(per barrel)










 

61Comments
Jul 18, 2011 4:25PM
avatar

global corp,

Stocks are down not because of the debt woes, but because the pork is running out at the national socialist corporate welfare trouf !

"When you see that in order to produce, you need to obtain permission from men who produce nothing; when you see that money is flowing to those who deal, not in goods, but in favors; when you see that men get rich more easily by graft than by work, and your laws no longer protect you against them, but protect them against you. . . you may know that your society is doomed."
Ayn Rand - Atlas Shrugged

 

Your post indicates that you believe that the private sector has never stepped up to the corporatewellfare trouf to receive favors from those that produce nothing.  Remember what is put into one end of the trouf by those that produce nothing is most often taken out of the other

end by those that do.

 

And if I rememeber my history correctly there have been many  times that men who have

operated some of the largest corporations in the world have been guility of graft and

malfesence to enrich themslves often at the expense of the people that worked for them and the government.  Several very large ones come to mind in the past decade.

 

IMO, both sectors, the public and private, have contributed to the current economic and

fiscal mess we are in. 

 

The blame game will get us nowhere in solving the problem.  All one has to do is take

a look at our current poltical process to see that.

 

Jul 18, 2011 2:58PM
avatar

Congress is the Board of Directors of the largest insolvent firm in the world, the U.S. Government.  Many of the BOD has been around through much of the past 3 decades that this insolvency has been in progress and those that haven't have been led down the primrose path by those that have.

 

The American people are the shareholders in the U.S. government.  They recently elected

a new chief executive officer, the President, an charged him with the task of returning this

the government to solvency.  Last November the American people elected several new

members to the BOD in the hopes that they would help the new CEO with the job

of putting the government's fiscal house back in order.  Since then though these new

memebers and there coalition have been working again the CEO in these efforts and things

have become signficantly worse.

 

Maybe the government needs to file chapter 11 bankrupcy until a new CEO and BOD can

be put in place.  Is it possible for the government to file bankrupcy?

 

May be the only answer.

 

I'm betting the next move by the BOD and CEO will be to "kick the can further down the

road".

 

Maybe its time for the private sector to bail out the government.  The way to do that

is to raise more taxes, or should I say more revenue.  Don't want to use tthat dirty word,

taxes.

 

 

 

 

 

 

 

 

 

 

Jul 18, 2011 4:18PM
avatar
Bank of America at 52 week low !  DIE BANK OF AMERICA DIE = THE TO BIG TO FAIL  !!!!!!!!!!!!!!
Jul 18, 2011 5:27PM
avatar

@ Global - quote with my comments added in italics.

 

"When you see that in order to produce, you need to obtain permission from men who produce nothing [banks] ; when you see that money is flowing to those who deal, not in goods, but in favors [lobbyists/Halliburton/Goldman Sachs/etc.]; when you see that men get rich more easily by graft than by work[Karl Rove], and your laws no longer protect you against them, but protect them against you [Tort reform/Current Supreme Court]. . . you may know that your society is doomed." Ayn Rand - Atlas Shrugged

 

What I never understood in people's interpretation of Atlas Shrugged is that the government was corrupt in that novel because the established private sector made it that way.  The kickbacks and influence the governement got were from established businesses!!  Yet, nobody ever blames the lazy and incompetant business environment and lobbyists of the novel for the problems.  They stop short at blaming the government.  The government is only the middleman of a corrupt system that is dictated by incompetant and lazy CEOs of industry leaders.  Eliminate the governement and you'd still have corruption and monopolies that crush the small guy.  Ayn Rand didn't intend it, but an honest reading of the novel speaks far more to the need for ethical business practice than the need to eliminate government.

Jul 18, 2011 4:11PM
avatar
Since when is a stock drop of 112 points a "dive" as the headline indicates? I was expecting a drop of at least 500 points; but lost interest in the article when I read the actual loss on the DOW.  A +/- 112 is a normal day on Wall Street. I sure wish the editors would utilize accurate headlines rather than this doomLightning and gloom tactic to attract readers.
avatar
May Day May Day -- with the Bernanke money machine broken by China saying we can not just print money any more. And Europe not having a money machine. The US and Europe economies are both going down this year.

Last Monday the Lord of the Dark Matter had this to say about the European monetary union: "How about we cut straight to the chase. If they do NOT soon come up with something along the lines of euro bonds (a euphemism for printing money the way the Fed does), or permanent fiscal transfers, then I don't see how the EMU gets through 2011. It is now that serious."
Jul 18, 2011 1:54PM
avatar
The comments are lower due worries on the European markets and the banks.

However by days end the comment manipulators will have their way and you will see the comments gain speed and be on the rise.

Jul 18, 2011 4:23PM
avatar
Weren't  the Global Debt Woes there Friday, or a week ago, or for the last few Months actually? I don't understand what differentiates one day of "Debt Woe" from another to the Stock Market!  One day it's a concern, and next day it's not?
Jul 18, 2011 4:58PM
avatar

just enter,

 

Let's get things straight.

 

1) If you have to borrow money to pay bills you are in trouble, but not in default.  Default is when you stop paying - whether you are an individual, a government, or a corporation.  Get a dictionary if you don't believe me.  There is a big diference. 

 

 

2) Bank of America's 2010 annual report says it has loans of $940B and deposits of $1.01Trillion.  See page 4 of their annual report at: media.corporate-ir.net/media_files/irol/71/71595/reports/2010_AR.pdf

 

If they were leveraged at 50 to 1 as you said, they would have to have nearly $50 trillion loaned out.  Preposterous!  That is roughly all the money in the entire world loaned by one bank.

 

3) Nobody is buying Tbills from Goldman Sachs for $1,005 that they can buy from the Treasury for $1,000. 

 

 

avatar
Financial meltdown already under way as the smart money leaves US T-bills and Euro government debt bonds. 

Don't wait until Friday it will be way too late to get your money out of the market by then.

Boehner has scheduled a vote for Tuesday on his "cut, cap and balance" plan, which would condition an increase in the debt limit on passage of a constitutional amendment to require the federal government to balance its books each year.

That bill stands little chance of passing the Senate but it might buy some goodwill with conservatives to eventually allow for passage of a compromise, such as the McConnell plan.

"If by Friday there is no meaningful agreement on Plan B and the parties remain far apart, the greenback could see panic selling as fears of possible technical default grip the market," said Boris Schlossberg, director of currency research at GFT in New York.

avatar
LOL only $112 billion needed to be raised for Europe banks. Try more than $3 trillion.
Lets see $300 billion Greece, $800 billion Ireland, $600 billion, $1 trillion Spain, $1 trillion Italy.

So let's see when they all default the extra $112 billion is not going to help. The banking regulators have gotten the math all wrong. The banks are leveraged 50 to 1 which means they can loan $50 for each $1 on deposit. Adding $112 billion to the banking system they think will allow them to loan $5.5 trillion dollars more than enough to bail out Europe and help with about $2 trillion in the US debt problem. 

The only trouble is when Greece defaults at $300 billion that $122 billion cushion is gone and the banks will have to call in $178 billion in Ireland debt which will cause Ireland to collapse and the banks will be out $978 billion then they will call on Portugal and go under another $500 billion to $1.4 trillion then they will call on Spain and go $2.4 trillion under then they will call on Italy and go $3.4 trillion under. Then they will call on US T-bills and go under $8.4 trillion.

Pretty much it's game over guys.

The issue was that the tests appeared to be too lenient for many analysts. And Bloomberg News suggested that European banks may have to raise as much as 80 billion euros ($112 billion) of additional capital to make investors happy.

The eight banks that failed out of the 90 tested on July 15 had only a combined capital shortfall of 2.5 billion euros ($3.5 billion), the European Banking Authority said July 15. As many as 20 banks need to bolster capital, JPMorgan Cazenove analysts wrote in a report after the results were published late Friday. 


Jul 18, 2011 2:37PM
avatar

perhaps only in the collectable market.  i have a couple of old dollar bills that are stamped HAWAII across them from before hawaii was a state.  they are just as nitche.  e-bay city! 

 

Why are gold and silver certificates worth anything??? Long ago they lost their ability to be turned into gold or silver. Just wondering if some people still believe they can be exchanged for gold and silver. They are just more useless pieces of paper folks.
avatar
ROFL , second funniest thing I have heard today. Wake up Reid when you have to borrow money to pay the interest on your bills you have already defaulted on your bills. LOL these people make me laugh as if the US has been paying it's bills since W.W.II and not having a deficit in almost all of the years since and if you include the interest every year has been a deficit.

"The Senate has no more important task than making sure the United States does not fail to pay our bills," Reid said in a statement. "To ensure that we meet this responsibility, the Senate will stay in session every day, including Saturdays and Sundays, from now until Congress passes legislation that prevents the United States from defaulting on our obligations."





Jul 18, 2011 2:40PM
avatar
might actually be a useful time to cash in some of the wife's old jewlery.......  i wonder if gold will hit $2000 soon?  10 different earings, 3 ounces each, with gems, and even 50% less for the 18 karat and trade in "screw job" still might leave some decent money left over.  it sure does start to look enticing.  i only need a few K to pay off the house. 
Jul 18, 2011 4:44PM
avatar

Well, I see that the market has made a comeback on the second half of their stress test.  That

must have been the part they used the cheat sheet on.

Jul 18, 2011 2:36PM
avatar
Finally someone comes here with something factual to say. I applaud you "just enter" for exposing the gold and silver "certificate" scam...they are worth about as much as big ben bernake's word...
avatar
Why are gold and silver certificates worth anything??? Long ago they lost their ability to be turned into gold or silver. Just wondering if some people still believe they can be exchanged for gold and silver. They are just more useless pieces of paper folks.


Kinda' makes the paper dollar reserve notes just about worthless........unl​ess,  you hold gold and silver certificates, which are now worth about 100 times their face value in dollars, or deutchmarks or Swiss francs...........no euros accepted............​..


Jul 18, 2011 4:11PM
avatar
So. after all the Wall Street was bluffing when in the morning hours is slipped down to -180 and recoiled back to current closing value. That means we do not really need to raise the debt ceiling. A manipulated market trying its mathematical terrorism to force public opinion.
Jul 18, 2011 7:13PM
avatar

Well all of you Obama socalist lovers the ride is comming to a end!!  If you are going to survive you are going to have to support the free market or small business. Obama is out of money he might be able to hold on untill the election (to ensure the anti american and those who think they are owed) vote but the party is comming to the end. 

    We must help those who create jobs and those who suppy jobs not tax them more. The government does not create anything especially meaningful jobs. let the individuals and corporations expand or pay higher dividens to the retiried share holders ( they then pay taxes on the money they get) .

    The misinformation provided by Obama is assuming that you are stupid , uniformed and have no idea how business run!! He counts on you being stupid!!!  And counts on you blindly following his socalist idealism by telling you what you want to hear!!   Stop being stupid and reasearch the lies he is telling everybody, this way he will be wrong because you really are not stupid !!

avatar
ROFL

ok let's look at Lehman Brothers right during the crash.

Financial institutions were highly levered. Lehman Brothers, for example, in its last annual financial statements, showed accounting leverage of 30.7 times ($691 billion in assets divided by $22 billion in stockholders’ equity).[25] Bankruptcy examiner Anton Valukis determined that the true accounting leverage was higher, it had been understated due to dubious accounting treatments including “repo 105” (Allowed by Ernst & Young LLP).[26] Accounting leverage is the ratio usually cited by the press.

you have to look at the investment bank associated with the real FDIC bank before the crash to see how much the real bank was leveraged. Say Bank of America had $1 trillion dollars and they loaned $500 billion of that to their mortgage investment bank. That investment bank could then like Lehman Brothers leverage that $500 billion up to 50 to 1 in some off shore accounts like in Iceland and Ireland. So the mortgage investment bank of BoA would have assets of $25 trillion and net shareholders worth of only $500 billion. If a small percentage of the mortgages went south which about 10 percent did that means that the investment bank of BoA lost $2.5 trillion dollars which wipes out the $500 billion the investment bank had. 

I hope you now understand why the old depression laws kept regular banks and investment banks separate. You are not seeing what these crooks really do with your money.

Go ahead and think that banks having investment banks only have the investment banks loan out on a 1:1 leverage. The bankers got really greedy and if the public knew just how much money they lost and why it destroyed the economy the public would demand that all the banks be shutdown. 

So when I say the banks were leveraged 50 to 1 I am serious and they are still leveraged like 30 to 1. There is a lot more pain out there folks.

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

RECENT QUOTES

WATCHLIST

Symbol
Last
Change
Shares
Quotes delayed at least 15 min
Sponsored by:

MARKET UPDATE

NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.
NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.
Market index data delayed by 15 minutes

[BRIEFING.COM] Equity indices closed out the month of August on a modestly higher note. The Russell 2000 (+0.6%) and Nasdaq Composite (+0.5%) finished ahead of the S&P 500 (+0.3%), which extended its August gain to 3.8%. Blue chips lagged with the Dow Jones Industrial Average (+0.1%) spending the bulk of the session in the red.

The final week of August represented one of the quietest stretches for the stock market so far this year. The first four sessions of the week produced the ... More


Currencies

NAMELASTCHANGE% CHANGE
There’s a problem getting this information right now. Please try again later.
Sponsored by:

VIDEO ON MSN MONEY