Dow off 43 as deep selling fades

Strength in bank and tech stocks pulls the market back from early losses. Whirlpool and Sprint results and a weak report on durable goods disappoint. A rising dollar pushes gold and oil lower.

By Charley Blaine Oct 27, 2010 1:55PM

Charley BlaineUpdated: 7:45 p.m. ET

What started out as a miserable day for stocks -- and then turned into a rotten day -- ultimately morphed into simply a modestly bad day.

Give the credit where credit is due. Banks were higher. So, were tech stocks, especially chip maker Broadcom (BRCM), up 11.7% to $41.56 after a spectacular earnings report late Tuesday.

There were plenty of reasons for a blow-off: earnings misses from Sprint Nextel (S) and Whirlpool (WHR), disappointment with a report on durable-goods orders and lower commodity prices and commodity stocks as the dollar rose against major currencies.

There were worries that the Federal Reserve's program to boost the economy might not be as big as expected -- or was the worst idea ever.

And yet, the Dow Jones industrials ($INDU) finished down only 43 points to 11,126. Not bad when you consider the blue chips had been down as many as 149 points around 11 a.m. ET. The Standard & Poor's 500 Index ($INX), meanwhile, was off 3 points to 1,182.

The Nasdaq Composite Index ($COMPX) closed up 6 points to 2,503.

Among stocks with big moves:

  • Sprint Nextel, down 9.9% to $4.30, the laggard among S&P 500 stocks. The mobile-phone carrier reported a third-quarter loss of 30 cents a share, worse than the analyst estimate of losing 28 cents a share. Costs grew as the company subsidized customer upgrades to phones capable of working on its new network.
  • Whirlpool, down 4.1% to $81.04. The world’s largest appliance maker reported a 9.2% drop in third-quarter earnings on weak sales in Europe and North America and a big charge to settle an antitrust case.
  • Procter & Gamble (PG), up 0.4% to $63.08. Fiscal-first-quarter results were down from a year ago but beat Street estimates. The culprit: higher materials costs.
  • F5 Networks (FFIV), up 14.7% to $117.58. Late Tuesday, the networking gear maker posted better-than-expected results for its fiscal fourth quarter and boosted guidance for the fiscal-first quarter. The growth of cloud computing -- delivering software and services over the Internet -- helped drive demand higher.

  • Equinix (EQIX), up 8.4% to $83. The operator of Internet data centers raised its 2010 and 2011 sales guidance.

  • Jones Group (JNY), down 22% to $15.23 -- the biggest decline among Russell 2000 Index ($RUT.X) stocks. The maker of Nine West shoes trimmed 2010 guidance to $3.67 billion at most; it had been $3.7 billion. Third-quarter earnings and sales missed estimates.

  • Jones Lang LaSalle (JLL), down 7.7% to $78.84. The big commercial-property broker reported third-quarter earnings excluding one-time items of 86 cents a share. Analysts had expected 95 cents.

After the close, Norfolk Southern (NSC) shares were off 0.7% to $60.94, despite earnings that beat Street estimates by 10 cents a share.

The railroad earned $445 million, or $1.19 a share, on revenue of $2.46 billion. Net income and earnings were up 47% from a year ago. Revenue was up 19% but only in line with Street estimates.

Separately, Wells Fargo (WFC) shares were off slightly to $25.70 after hours. After the close, the nation's largest servicer of mortgages conceded problems with affidavits filed with foreclosure documents. The bank plans to file supplemental documents in some 55,000 proceedings between now and mid-November.

Futures trading suggests a flat open on Thursday. It's a heavy day of earnings reports, including results from 3M (MMM), Exxon Mobil (XOM), Royal Dutch Shell (RDS.A) and Microsoft (MSFT). (Microsoft is the publisher of MSN Money.)

The big economic report for the day is the weekly report on initial jobless claims.

3 good reasons for a sell-off
Here's why the day started so badly for stocks.

First: The market has been struggling to get above key levels, such as 1,184 on the S&P 500 and 11,205 on the Dow. That's the Dow's closing high for 2010, which came on April 26. So some investors are taking profits.

In fact, a number of analysts were actually hoping for a slump, believing the market has risen too quickly in the last two months. The afternoon recovery was, in fact, a disappointment.

Second: The economic data have been weak. Today's report on durable goods was a problem, and housing is going to be weak for years.

Third: Earnings have been showing a mixed picture. Some 80% of companies are beating estimates on earnings. But only half or so are beating on revenue.

Energy prices -- New York close
 

Wed.

Tues.

Month chg.

YTD chg.
Crude oil 

$81.94

$82.55

2.46%

3.25%
(per barrel)











Heating oil

$2.2383

$2.2500

-8.27%

5.80%
(per gallon)











Natural gas 

$3.2920

$3.3540

-14.98%

-40.92%
(per mil. BTU)











Unleaded gasoline

$2.1020

$2.0940

2.80%

2.39%
(per gallon)











Retail gasoline

$2.8070

$2.8100

4.39%

6.37%
(per gallon; AAA)












Weakness below the surface on durable goods

The durable-goods orders were higher in September, but most of the gain was due to new orders for airplanes and the like. And that was the problem.

Nonmilitary orders for equipment like computers and machinery -- but excluding airplanes -- dropped 0.6% after a 4.8% gain in August that was smaller than previously estimated, the Commerce Department said.

The report shows a continuing picture of an economy struggling to gain speed more than a year into a recovery from the worst recession since the 1930s.

Durable-goods orders measure orders for plant and equipment meant to last at least three years.

The dollar's rally doesn't help
The dollar moved higher against major currencies for the third straight day, and that may not be a good thing. A rising dollar hurts the value of profits earned by U.S. companies outside the United States and could put a limit on exports.

So, Boeing (BA), probably the single largest U.S. exporter, was off 0.6% to $70.86. 3M was down 0.1% to $90.37.

The greenback's gain and a government report showing larger-than-expected domestic inventories pushed crude oil down 61 cents to $81.94 a barrel.

Gold settled down $16 to $1,322.60 an ounce.

Interest rates were higher; the 10-year Treasury yield was at 2.712% today, up from 2.636% on Tuesday.

The crude oil decline pushed energy stocks lower. ConocoPhillips (COP) shares were down 1.2% to $60.08, despite reporting that net income in the third quarter more than doubled to $3.1 billion. Excluding gains from asset dispositions and other items, third-quarter 2010 adjusted earnings were $2.2 billion, or $1.50 per share.

Exxon reports third-quarter results on Thursday, was down 1.3% to $65.67. Chevron (CVX), which reports on Friday, was off 1% to $84.31. The declines represented more than 22 points of the Dow's loss today.

Not only was gold down, but copper and other metals prices were lower as well. That pushed Freeport-McMoRan Copper & Gold (FCX) down 2.8% to $95.50. Alcoa (AA) was off 1.3% to $12.70. U.S. Steel (X) was down 1.5% to $40.25. AK Steel (AKS) was off 3.4% to $12.40.

How big a move will the Fed make?
The concern about the Fed's so-called quantitative easing program stemmed from a story in The Wall Street Journal suggesting that the program won't be as large as expected.

Goldman Sachs, for example, had expected the Fed would buy up to $2 trillion in Treasury securities to keep interest rates low and boost the economy. The Journal story suggested that the program may be limited to only "a few hundred billion dollars at next week’s meeting." The central bank would pause to see the effect and move again if necessary.

The source of the information was not disclosed, but many analysts believe Fed Chairman Ben Bernanke may have briefed reporter Jon Hilsenrath.

The idea of printing money to buy securities is highly controversial, even within the Fed. Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, has opposed the idea because he's worried the program could potentially set off inflationary pressures.

PIMCO's Bill Gross also is worried about inflationary pressures and, in his monthly outlook, called the idea "something of a Ponzi scheme."

Bond markets haven't been wild about quantitative easing. The dollar dropped quickly in August and September once Bernanke began talking about it. But liberal economists believe the concern is so misguided that not stimulating the economy further will send the economy back into recession.

A little good news on housing
New-home sales in September were better than expected. A Commerce Department report showed sales running at a 307,000 annualized rate, up 6.6% from 288,000 in August and better than the 300,000 or so rate analysts had expected.

The monthly sales rate, however, is the fourth-lowest since sales began being tracked in 1963.

The sales rate is off 78% from the July 2005 peak of 1.39 million new homes sold. That, of course, came when the housing bubble was in full frenzy.

There is a concern going forward that the huge glut of foreclosures will limit new-home sales in the months ahead.

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

Tues.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.130%

0.130%

-13.33%

160.00%
5-year Treasury note 

1.304%

1.247%

0.77%

-51.45%
10-year Treasury note

2.712%

2.636%

7.45%

-29.43%
30-year Treasury bond

4.041%

3.994%

9.30%

-12.93%
Currencies







 

 
U.S. Dollar Index

78.377

77.910

-0.71%

0.20%
British pound

$1.5775

$1.5853

0.35%

-2.48%
(in U.S. $)











U.S. $ in pounds

£0.6339

£0.6308

-0.35%

2.54%
Euro in dollars

$1.3774

$1.3864

0.84%

-3.90%
(in U.S. $)











U.S. $ in euros

€ 0.7260

€ 0.7213

-0.83%

4.06%
U.S. $ in yen 

81.90

81.39

-2.13%

-11.94%
U.S. $ in Chinese

6.70

6.66

-0.21%

-1.78%
yuan











Canada dollar

$0.973

$0.977

0.08%

2.28%
(in U.S. $)











U.S. dollar 

$1.029

$1.023

-0.08%

-2.23%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,322.60

$1,338.60

0.99%

20.65%
(per troy ounce)











Copper

$3.7755

$3.8690

3.40%

12.82%
(per pound)











Silver

$23.4040

$23.8300

7.25%

38.94%
(per troy ounce)











Wheat 

$7.0275

$6.9200

4.27%

29.78%
(per bushel)











Corn

$5.7725

$5.7100

16.44%

39.26%
(per bushel)











Crude oil 

$81.94

$82.55

2.46%

3.25%
(per barrel)










 
19Comments
Oct 27, 2010 3:37PM
avatar
Island with a palm treeThis late market come back, is a come on by the shorts, don't get suckered by this. Tomorrow will be another sell-off day.Lightning
Oct 27, 2010 5:50PM
avatar
fateteaser.  You're right on the mark. There wouldn't be a market without ups and downs. What's troubling about this market is the range of the swings. Never saw anything like it in 35 years of market experience. Media news and most analysts' explanations are 100% bull. Same for economists. The unknown factor is the enormous influence hedge funds can play in this scenario. In many instances, they not only can manipulate the market, but they are the market.
Oct 27, 2010 4:33PM
avatar
fateteaser...I have to agree with you. Stocks I have been watching to buy on a dip have been being sold off by mutual funds in large amounts in recent months but they are good solid companies doing well.....I think the minor correction that has been being discussed is upon us but that will present a good buying opportunity for those of us with too much cash on the sideline. After the election I think we move higher especially if the Dems lose some power. The economy is improving even if we are not getting enough jobs.
Oct 28, 2010 2:45AM
avatar

Sorry buzzybucks,... there are currently no jobs available for a man of my knowledge and wisdom. In 2012 there will be though, as I will be voting for myself as the next U.S. President. If I happen to win, I as dictator, promise to turn this into the greatest Christian Socialist country the world has and ever will know. Now do the right and smart thing by voting for me and my Peace and Justice Party in 2012.

 

Everyone will be millionaires, own their own business, own their own homes (all apartment complexes will be demolished and banned), the stock market and all casinos will be demolished and banned, all auto racing, boxing, fake wrestling and other stupid and useless sports and spectator events will be demolished and banned, all schools will be public and teach Christianity and have school prayer, all homosexuals and abortion doctors, will be tossed out of the country, abortion clinics will be demolished and banned. Anyone breaking any of my rules will be persecuted to the full extent of the law and thrown on a maximum security island with all the rest of the murderers, rapists, capitalist pigs and all the rest of the scum of the Earth. Political correctness will be banned as well! Simple solutions to simple problems! You are either with us or against us! Change you can believe in! God's way or the highway!

 

My foreign policy is simply Peace. Any nation that attacks us or the Jews without just cause, will be obliterated with nukes. Jerusalem and the entire State of Israel will become a Jewish state only, as promised by God. The Palestinians/Philistines/Arabs must relocate to their lands peacefully or become an extinct race and culture. You think the Holy Crusades were brutal? That war was nothing compared to my modern day Holy Crusade. Any harm done to Jerusalem as the 3rd most holiest site to the Muslims and the 1 and only Holy site of the Jews, which it belongs to through and through, will die. Muslims claim that Jerusalem is their 3rd most holiest site, yet Jerusalem is not mentioned once in the Quran. How would Muslims like it if the Jews claimed that Mecca and Medina were their 2nd and 3rd holiest sites? Would they welcome them with opened arms and share their lands and holly sites with them? I think not! So stop the lies and hypocrisy. I would have already nuked Iran, but since I didn't win the last election, it still has yet to happen, but it will eventually, by me or someone else with great wisdom and knowledge.

 

Long live Christian Socialism! GOD bless our Christian America!

Oct 27, 2010 10:07PM
avatar

Money Wise,

 

you could give LostOnEarth a job...just think, it would be something he's never had before

Oct 27, 2010 9:46PM
avatar

The facts and the truth are out there! The rich and powerful will soon get their just rewards. Remember, we vastly outnumber you! Run for the hills cowards!

 

http://  www.irp.wisc.edu/dispatch/categories/politics/

Oct 27, 2010 9:17PM
avatar

Deeeeman, Those are great !!!

On the sporting channel. "Lame Duck Hunting".

Oct 27, 2010 7:29PM
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I'm on a roll: someone stop me..."Project Runaway Debt", "All My Children...Are Home Again", "CBO NUMB3RS", "Masterpiece Theatre: House Bill HR3962 on CSPAN2", "Modern Dysfunctional Family", "Army Wives DADT", "Law and Order: Special Immigrant Victim Unit", "Legend of the Speaker", "11210", "Young and the Registeredless", "Big Bang Theory: Why the Stock Market Dropped 1000 in 10 Minutes", "House...Abandoned", "Grey's Theskytomy", "The Golfing Bachelorettes", and "#@%!&*Days of Our Lives".
Oct 27, 2010 7:13PM
avatar
NO coverage at all about the fraud and fixing of voter machines that automatically vote democrat when you hit the vote all republicans on MSN..... I will never again read or visit this bullsh1t website and will never post here again!
Oct 27, 2010 6:47PM
avatar
Island with a palm treeExceo , I think you 're right , most of the hedge funds are in one way or the other related to the big banks such as gs, jpm etc. so together they can make big waves in the market.Beer mug
Oct 27, 2010 6:07PM
avatar
BREAKING: Soros-funded NPR fall lineup: "Dancing w/ the Czars," "Survivor: Detroit, Michigan", "Happy Days-NOT!", "Glee: Nancy and Harry Pass the Big One", & "Lost: the Obama Presidency", "NCIRS", "Criminal Minds: The Congressional Years", "American I Owe", "So You Think You Can Pay the Mortgage", "Falling Behind the Kardashians", "Desperate Houseowners", "Smallville II: Tinyville", "Vampire Tax Diaries", "One Term Hill", "Biggest Looser: Election Day Weigh-in", "Doctor Who: The Health Care Initiative", "General Hospital... Pronlems", "The Mental Economist", "Two and a Half Men: Pelosi, Obama and Reid", and "Lousiana Shores".
Oct 27, 2010 5:58PM
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SIX DAYS; then it's butt kicking time.......anticipat​ion of watching harry/nancy/boxer/waters/feinstein/frank​s/rangel/dodds get the freaking boot.....oh my, serve me three every half hour Martini glassOpen-mouthedMartini glass
Oct 27, 2010 5:52PM
avatar
Island with a palm treeHey Sunny, I like your Avatar, looks like one of those Broadway thing. Happy investing.Auto
Oct 27, 2010 5:20PM
avatar
China, Russia and the Arabs are buying a lot of airplanes from us so they can then use them to nuke us. Greed is good! Eye-rolling
Oct 27, 2010 5:08PM
avatar

Money wise,

Island with a palm treeHey! thanks for the job offer. what kind of job are you're offering me.lol..

Yup! you are right we don't buy this media bull. They make their living thru news ,so  they coincide the  market movement to any news they can get without giving it much thought . But i make my living through  investing and or trading, so i am very careful in assimilating data's that may affect my decisions concerning my stock holdings.Beer mug

Oct 27, 2010 4:23PM
avatar
I love watching the financial programs. They are optimistic no matter what happens. They all know about the bond bubble no one talks about and the even bigger bubble but I will sit and laugh at all the optimism anyway.
Oct 27, 2010 3:57PM
avatar

fateteaser,

Sounds reasonable.  Surge after next Tuesday or Wesnesday depending on West Coast election return timing.  I'm advising my clients daily through email.  You sound like a person who doesn't buy all of the media bull.

Want a job?

Oct 27, 2010 3:38PM
avatar
Is fear over the economy NEW news?  The stock market is like a adult or kid HHD.
Oct 27, 2010 2:16PM
avatar
Island with a palm treeI expect a slight dip in the market. But we will recover quickly and move to a new market high. meantime get ready for a dip.Vampire batStormy cloudMoney
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