Chip stocks, Cummins warning pull stocks lower

The Dow falls 83 after engine-maker Cummins sees demand weakening in the US and abroad. Alcoa earnings don't impress. AMD and Applied Materials shares slide on warnings. JC Penney falls on a downgrade. Gold and crude oil slide.

By Charley Blaine Jul 10, 2012 1:17PM
Charley BlaineUpdated: 5:35 p.m. ET

An early stock market rally gave way to a nasty bout of selling after diesel-engine maker Cummins (CMI) offered a dismal outlook for the rest of 2012 and two big players in semiconductors issued earnings warnings.

Cummins said orders for trucks and power-generation equipment in the United States have declined, and it saw weaker-than-expected sales trends in Brazil, China and India. The company had expected a 10% revenue gain over 2012. Now it sees revenue at break-even compared to a year ago. That would mean $18 billion or so. Shares were off $8.53 to $86.91.

The Dow Jones industrials ($INDU) was up as many as 94 points, down as many as 129 points and finally settled down 83 points to 12,653. The loss was the blue chips' fourth in a row.

The Cummins warning, along with warnings from Advance Micro Devices (AMD) and Applied Materials (AMAT), overwhelmed any cheer from news that European finance ministers planned to expedite some $36 billion to support Spanish banks.

In addition to the Dow's decline, the Standard & Poor's 500 Index ($INX) was off 11 points to 1,341, and the Nasdaq Composite Index ($COMPX) was off 29 points to 2,902.

Article continues below.
The Nasdaq-100 Index ($NDX) was off 25 points to 2,586. Apple (AAPL), the biggest influence on the index, was down $5.68 to $608.21. Apple's loss alone subtracted 5 points from the Nasdaq. Losses for Intel (INTC) and Microsoft (MSFT) contributed an additional 5 points to the Nasdaq-100's loss. (Microsoft is the publisher of MSN Money.)

Like the Dow, the S&P 500 suffered a fourth straight loss; the Nasdaq saw its third loss in a row.

Gold settled down $9.30 to $1,579.80 an ounce. Silver was down 56.20 cents to $26.88 an ounce. Copper dropped 3.35 cents to $3.398 a pound.

Crude oil in New York settled down $2.08 to $83.91 a barrel. Brent crude had dropped $2.42 to $97.90 a barrel. The national average price of gasoline was $3.381 a gallon, according to AAA's Daily Fuel Gauge Report.

Wednesday brings the minutes from the Federal Reserve's June 19-20 meeting. Investors will watch for signals of the standards the central bank may use to decide if it will add more stimulus to the economy.

In addition, there are reports due on mortgage applications, oil inventories and the U.S. trade deficit. The most important earnings report is due from Marriott International (MAR).

Energy prices -- New York close



Tues.

Mon.

Month chg.

YTD chg.
Crude oil (-CL)

$83.91

$85.99

-1.24%

-15.10%
(per barrel)











Heating oil (-HO)

$2.7195

$2.7490

0.35%

-6.68%
(per gallon)











Natural gas (-NG)

$2.7370

$2.8830

-3.08%

-8.43%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.7469

$2.7594

4.37%

3.37%
(per gallon)











Brent crude 

$97.90

$100.32

0.10%

-8.83%
(per barrel)











Retail gasoline

$3.3810

$3.3820

0.84%

3.21%
(per gallon; AAA)












Chip weakness weighs on Nasdaq
Advanced Micro Devices tumbled 63 cents to $4.99 as the chip maker slashed its outlook for second-quarter revenue after seeing disappointing sales in China and Europe.

Applied Materials lost 30 cents to $10.71 after the chip-gear maker said it expects to miss its full-year estimates and its third-quarter results will be at the low end of its previous outlook.

AMD was the worst performer among stocks in the Philadelphia Semiconductor Index ($SOX); Applied Materials was the 10th-worst performer. The index was off 8.5 points to 363.

Intel (INTC), meanwhile, will spend more than $4 billion to buy up to 15% of ASML (ASML). The investment will bankroll the Dutch company's research into costly next-generation chipmaking technology. Intel's investment is a major vote of confidence in the European company. ASML shares in New York jumped $4.11 to $52.57. Intel was off 61 cents to $25.56.

Alcoa shares drop on pricing pressures
Alcoa late Monday kicked off the quarterly earnings season with revenue that beat Street estimates and earnings that were in line.

The results came despite world aluminum prices that are at nearly two-year lows.

The company forecast growing demand in the aerospace and auto sectors. But those businesses aren't where the problems are. The problem is that the global market for alumina -- that raw material that's refined into aluminum -- is awash in the stuff. And that's depressing prices. Result: Shares of the aluminum giant were off 36 cents to $8.40.

The stock was the worst performer among the 30 Dow stocks.

Only nine Dow stocks were higher, led by Kraft Foods (KFT) and JPMorgan Chase (JPM), which reports results before Friday's market open. Alcoa and Caterpillar (CAT), down $2.87 to $80.27, were the laggards. Caterpillar fell in sympathy with Cummins.

Coca-Cola (KO) was unchanged at $77.98 after shareholders approved a 2-for-1 stock split. The split will take effect in early August.

Only 107 S&P 500 stocks showed gains on the day, led by Southwest Airlines (LUV), up 39 cents to $9.63, and Harley-Davidson (HOG), up $1.40 to $47.09. ADM and Cummins were the laggards.

Express Scripts (ESRX) and Whole Foods Market (WFM), up 98 cents to $55.34 and $1 to $95.12, respectively, were the winners among Nasdaq-100 stocks.

Green Mountain Coffee Roasters (GMCR), down $1.57 to $21.95, and Micron Technology (MU) were the laggards. Green Mountain's decline came after hedge-fund manager David Einhorn said Green Mountain's Keurig coffee maker was "on the way out."

Nineteen stocks in the index were higher.

More woes for J.C. Penney
J.C. Penney (JCP) fell $1.27 to $20.76 after Credit Suisse nearly doubled its adjusted second-quarter loss estimate for the department store operator. You can't have a turnaround until you hit a bottom.

For J.C. Penney, that's still around the corner, analyst Michael Exstein wrote clients today. The company may lose 50 cents a share in the fiscal second quarter; his original loss estimate was 31 cents.

The company has shaken the confidence of vendors by slowing or canceling orders due to the persistent sales slump. It announced it is laying 350 workers at company headquarters in Plano, Texas.

Research In Motion pleads for support
Research In Motion (RIMM) shares were down 38 cents to $7.29, despite the assurances of its management at its annual meeting today that it's moving quickly to get a more technologically savvy board of directors. CEO Thorsten Heins said the company is moving "around the clock" to get its BlackBerry 10 device to market.

Mako Surgical (MAKO) plunged $10.60 to $14.01 after the company posted lower-than-expected sales of its surgical robot for the second quarter in a row and cut its sales forecast for the full year after the close on Monday.

James River Coal (JRCC) shares fell 71 cents to $2.16. The company was among a group of coal companies under pressure after Patriot Coal filed for Chapter 11 bankruptcy protection from creditors late Monday.

Helen of Troy (HELE) shares dropped $4.59 to $29.44. The company, which makes personal-care products like hair dryers and curling irons for women, said fiscal-first-quarter earnings fell 4.6% and cut its profit outlook for all of fiscal 2013.

Some help for Spain
The eurozone will speed delivery of as much as 100 billion euros ($123 billion) in Spanish bank aid, with an initial 30 billion euros ($36 billion) to be lent by the end of July. The goal is to eventually use the eurozone bailout fund to recapitalize Spanish banks directly rather than saddling Spain's government with debts.

Eurozone financial ministers also agreed to give Spain an extra year to bring its budget deficit back in line.

Spain's 10-year bond yield fell back below 7% on the news.

Italian yields were also falling amid expectations that Germany's top court will approve plans to more easily disburse eurozone rescue funds.

The big issue for investors was what these moves meant in the long run. The larger issues for investors -- tax and spending reform across the continent -- still have not been dealt with.

Short hits from the markets -- New York close



Tues.

Mon.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0900%

0.070%

12.50%

800.00%
5-year Treasury note 

0.619%

0.624%

-15.09%

-25.42%
10-year Treasury note

1.498%

1.513%

-9.70%

-19.94%
30-year Treasury bond

2.594%

2.620%

-6.12%

-10.21%
Currencies











U.S. Dollar Index

83.559

83.351

2.21%

3.77%
British pound

1.5509

1.5530

-1.24%

-0.19%
(in U.S. $)

 








U.S. $ in pounds

£0.645

£0.644

1.26%

0.19%
Euro in dollars

$1.23

$1.23

-2.94%

-5.44%
(in U.S. $)

 








U.S. $ in euros

€ 0.816

€ 0.812

3.03%

5.75%
U.S. $ in yen 

79.62

79.56

-0.16%

3.26%
U.S. $ in Chinese

6.39

6.37

0.29%

1.03%
yuan











Canada dollar

$0.981

$0.982

-0.18%

-0.03%
(in U.S. $)

 








U.S. dollar 

$1.020

$1.019

0.18%

0.03%
(in Canadian $)

 








Commodities

 

 

 

 
Gold (-GC)

$1,579.80

$1,589.10

-1.52%

0.83%
(per troy ounce)

 








Copper (-HG)

$3.398

$3.432

-2.82%

-1.11%
(per pound)

 








Silver (-SI)

$26.8820

$27.4440

-2.64%

-3.70%
(per troy ounce)

 








Wheat (-ZW)

$8.2125

$8.2825

8.45%

25.81%
(per bushel)

 








Corn (-ZC)

$7.3000

$7.300

15.01%

12.92%
(per bushel)

 








Cotton 

$0.7175

0.7069

0.59%

-21.74%
(per pound)

 








Coffee

$1.8450

1.8235

8.08%

-19.66%
(per pound)

 








Crude oil (-CL)

$83.91

$85.99

-1.24%

-15.10%
(per barrel)










 

222Comments
Jul 10, 2012 3:20PM
avatar

DD,

 

So...... taxing the rich, more stimulus, a lack of details on "creating" jobs, pushing Obamacare further.... this is your answer for an economic reabound?

 

REALLY??? 

 

Bashing others with no quality options of your own, espscially when you have been driving the bus for 5+ years now, is embarrasing.

Jul 10, 2012 5:01PM
avatar
Hey MSN, I'm an older guy. Where the heck are all these younger women you keep saying want to date me?
Jul 10, 2012 1:59PM
avatar
Joe Biden's new slogan -

I'm with stupid ---->
Jul 10, 2012 2:00PM
avatar
"100% chance of global recession...."

It does seem that way.
Jul 10, 2012 4:13PM
avatar
LIES YOU CAN BELIEVE IN !

I'll take a "flip flopper" over a LIAR , anyday

gay marriage
dream act
cut the deficit in half
total transparency
no pork in my bills
no cronyism
I'm not a socialist
just a guy in the neighborhood
Tony rezko, who?
college transcripts ?
a REAL birth certificate ?
College thesis ?
moochele thesis ?


Jul 10, 2012 2:58PM
avatar

See how quickly Jubak's forum was pulled.  Now, here comes Charlie.  Give us 'bone', there Charlie.  The 'markets' are a joke and 'controlled and contrived' and have been for quite some time.  Another city went bust...Scranton, PA.  This will continue as k's and pension plans are being raided right now.  The markets' are just 'churning the same.  There was no recovery.  We are in a depresssion right now.  It is basically game set and match for the pundits here.  They backed themselves all the way into that infamous corner this time.  It is all BS and we know it and they know it. 

Jul 10, 2012 3:38PM
avatar

Just read in a French newspaper, a journalist interviewing an American tourist saying:

"We call it now the Divided States of Obama"...saying he was ashamed of being American......

 

Maybe, just maybe, that's what Obama hopes.............

Jul 10, 2012 3:36PM
avatar

Dear Obama,

YOU want to TAX me for making money while working 70+ hours per week???

 

YOU will get your wish,  but no money from me, just more employees laid off........

because that's what you are askinf for!!!

Jul 10, 2012 5:10PM
avatar

25 years ago we had Ronald Regan, Johnny Cash and Bob Hope. Today we have Obama, no cash and no hope. Vote him out in November and the stock market will soar...

Jul 10, 2012 10:18PM
avatar

Wealth is down, GDP is down, consumer confidence is down, productivity down, labor participation rate down, savings down, and corporate profits down. Food prices up, government expenditures up, food stamp benefits up, social security disability claims up, those falling into poverty level up, consumer debt up, national debt up, trade deficit up, and Whitehouse excuses up

Jul 10, 2012 4:16PM
avatar
I guess tomorrow they will go back to the Greece excuse.  Its been a little while.
Jul 10, 2012 2:39PM
avatar

The market, if left to its own devices will continue to go down until all the fake wealth that was created in the run up to the housing crisis has been defaulted out of existence.  All that's left to decide is who will be holding the hot potatoes (financial instruments)  when they actually default.  All these QEs and such are just buying time so the institutions can lay off as many of the bad investments as possible.  Hopefully they aren't still making stupid investments (like Morgan Stanley) but one can never be sure.   We will never be told how deep our banks are into Europe's mess and the public would probably panic if they found out.  If you know you will get bailed out you have to invest irresponsibly just to keep up with the other too big to fail banks. Otherwise your earnings will lag and your stock might dip!  GASP!!   The result is that we are probably going to have 10 bad years instead of 3 terrible years.   The savers that were prepared for these times are footing the bill with the devaluation of their savings through QEs.  Counting all the fees, some retirees are already paying the banks to keep money there.  It shouldn't be legal.

 

The next fiasco will be the student loan balloon.  Same mechanics as the housing crisis.  The value of the commodity (a college education) becomes so artificially inflated that every student is convinced that they can borrow their way to success.  There are about twice as many colleges and universities now as there were when I came along and they all have wonderful student aid departments that help you to get all the money you need for that underwater basketweaving degree.   You can't borrow money for a house anymore but you sure can get all you want for that college degree.  No credit score or nothing!  Sound familiar?    Don't get me wrong, we need highly educated people to be successsful as a country but every student needs to see an honest return-on-investment analysis of their college payouts before they saddle themselves with so much debt. There is a tremendous sucking of wealth into the "business"  of higher education that will never be recouped.  The scariest part of this bubble is that when it pops, you can't escape your mistake through bankruptcy.  The IRS comes after you.  I forsee some type of indentured government service for all these grads.  At least they will have a job. 

 

     

 

 

 

Jul 10, 2012 5:13PM
avatar
Wow....

I had no idea how many documented falsehoods have come out of Obama's mouth.

The least truthful President, PEROD...

As documented on:  www # audacityofhypocrisy # com 
Jul 10, 2012 5:31PM
avatar

This is only the beginning folks. BIGGER and BIGGER Layoffs are still to come. Who is kidding Who the real unemployment rate is at 14.1 % not the 8.2% we are deliberately stuck on before the elections. And it is getting worse as the Food Stamp recipient add another 30K this month along. Shopping is a thing of the past and your seeing more and more Accepting food stamp signs everywhere. Retail is just starting to feeling it in the last month and it will continue. Just wait for the back to school disappointment, the post election climax or anticlimax and BIGGER STILL when retail implodes right after Christmas...!!! Flush Q3 and Q4 down the toilet with uncertainty, looming Taxes and food prices beginning to soar again all playing parts in the Negative growth cycle as it amplifies. Oil is going to hover at 80.00+ a barrel just to keep the oil companies and oil countries from "suffering" . US Manufactures and sales territories have been decimated with many companies not wanting to hold on to any inventory along with Strained credit with vendors placing them on COD or CIA payment options only leaving no option but to close down and go bankrupt. Credit is tight or non existent and the Banks are holding on to a lot of BAD commercial and HOME real estate debts. Exports and foreign investments begin to drop again after the dollar finds some strength and starting to cut into Home purchases by foreign investors. Watch for this 4 YEAR RECESSION TO CONTINUE...!!

Jul 10, 2012 4:56PM
avatar
I smell QE in the air.  I mean it has worked so good in the past.
Jul 10, 2012 1:49PM
avatar
Obumers new campaign slogan.

I'm not just a President, I'm a d!ck-tater
Jul 10, 2012 2:43PM
avatar
FBI has upped the reward to $1 million for the arrest of members of Eric Holders Mexican drug cartel wanted for murdering a US Border Patrol agent. 
Jul 10, 2012 6:06PM
avatar

This is only the beginning folks. BIGGER and BIGGER Layoffs are still to come. Who is kidding Who the real unemployment rate is at 14.1 % not the 8.2% we are deliberately stuck on before the elections. And it is getting worse as the Food Stamp recipient add another 30K this month along. Shopping is a thing of the past and your seeing more and more Accepting food stamp signs everywhere. Retail is just starting to feeling it in the last month and it will continue. Just wait for the back to school disappointment, the post election climax or anticlimax and BIGGER STILL when retail implodes right after Christmas...!!!  Flush Q3 and Q4 down the toilet with uncertainty, looming Taxes and food prices beginning to soar again all playing parts in the Negative growth cycle as it amplifies. Oil is going to hover at 80.00+ a barrel just to keep the oil companies and oil countries  from "suffering" . US Manufactures and sales territories have been decimated with many companies not wanting to hold  on to any inventory along with Strained credit with vendors placing them on COD or CIA payment options only leaving no option but to close down and go bankrupt. Credit is tight or non existent and the Banks are holding on to a lot of BAD commercial and HOME real estate debts. Exports and foreign investments begin to drop again after the dollar finds some strength  and starting to cut into Home purchases by foreign investors. Watch for this 4 YEAR RECESSION TO CONTINUE...!!

Jul 10, 2012 3:47PM
avatar

Tim,

 

You do realize that was EXACTLY the game plan you Dems used to wn in '08, right?

 

To a T..... 

Jul 10, 2012 2:41PM
avatar

Another dramatic swing for no reason. Tomorrow, stocks break an all time high. The next day, stocks fall because the wind blew today! This is nonsense! Speculators are raking it in though! Let's keep giving them free reign! Yeah, let's keep doing that!

(sarcasm, in case anybody can't figure that out).

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