Dow runs aground on Greece
The blue chips see a 91-point rally in the morning fall apart. Facebook expands the shares in its IPO by 25%, but Apple falls 1.3%. JC Penney and Abercrombie & Fitch shares are slammed. Crude falls under $93. Gold is near bear-market territory.
Updated: 7:30 p.m. ETAn early rally in U.S. stocks faded today as worries about Europe and weakness in big tech shares offset a better-than-expected report on housing starts.
The Dow Jones industrials ($INDU) fell for the 10th time in 11 days, giving up an early gain of 91 points. The sell-off was prompted by concerns that some Greek banks may not be able to get the cash necessary to let depositors withdraw their money. Actually, they had to switch to getting the cash from the Bank of Greece.
The Greek bank report pushed the dollar to its highest level against the euro since early January. A rising dollar tends to push stock prices lower because of worries that U.S. goods and services will become too expensive. Also moving lower today were crude oil (-CL) and gold (-GC). The metal has fallen nearly 20% since last summer.
Meanwhile, minutes of the Federal Reserve's April 24-25 meeting suggested Fed officials are worried that a U.S. fiscal crisis is developing that could hit the economy later this summer or fall. But, as it has signaled for several months, the Fed has no plans yet to provide new support for the economy.
The Dow fell 33 points to 12,599. The Standard & Poor's 500 Index ($INX) was off 6 points to 1,325; it had been up as many as 11 points. The Nasdaq Composite Index ($COMPX) fell 20 points to 2,874 after rising 20 points in the morning.
The Nasdaq-100 Index ($NDX), heavily influenced by Apple (AAPL), dropped 19 points to 2,562. Apple was off $7.09 to $546.08, despite reports that its new iPhone, due in the fall, will have a larger, 4-inch screen. That cost the index about six points.
Apple has fallen 14.2% since hitting a closing high of $636.23 on April 9.
Also lower with Apple: Microsoft (MSFT), down 31 cents to $29.90; Qualcomm (QCOM), down $2.33 to $59.11; Intel (INTC), down 38 cents to $26.50, and Oracle (ORCL), down 34 cents to $26.72. (Microsoft publishes MSN Money.)
The Dow is down 5.1% since hitting a four-year high on May 1. The S&P 500 is down 6.6% since peaking on April 2, with the Nasdaq off 7.9% since its 2012 peak on March 26.
After hours, shares of Limited Brands (LTD) were off nearly 3.5% to $46.30. Earnings of 41 cents a share were in line with Street estimates, as was revenue of $2.915 billion. The shares had closed at $47.96, down 9 cents in regular trading.
Ahead on Thursday
Thursday brings, of course, the pricing for Facebook's initial public offering. That will come after the close. In addition, the day brings earnings from retailers Wal-Mart Stores (WMT) and Gap (GPS) and software makers Intuit (INTU) and Autodesk (ADSK).
The government reports on initial jobless claims. The Conference Board releases its report on leading economic indicators in April. The Philadelphia Federal Reserve Bank releases its monthly report on manufacturing in its district.
Futures trading suggests a modestly higher open.
Gold is nearly in a bear market
Gold settled down $20.50 to $1,536.60 an ounce, its lowest settlement since July 2011. Gold is off 8% this month and 2% this year. Since peaking at $1,891.90 on Aug. 22, 2011, gold has fallen 18.8%. A 20% decline in the price of an asset is the popular definition of a bear market.
Crude oil in New York settled down $1.17 to $92.81 a barrel, its lowest settlement since Nov. 2, 2011. Crude is off 6.7% this year. Brent crude was off 59 cents to $111.65 a barrel.
Interest rates were lower, with the 10-year Treasury yield falling to 1.765% from 1.777% on Tuesday.
| Energy prices -- New York close | ||||||||||||
| Wed. | Tues. | Month chg. | YTD chg. | |||||||||
| Crude oil (-CL) | $92.81 | $93.98 | -11.50% | -6.09% | ||||||||
| (per barrel) | ||||||||||||
| Heating oil (-HO) | $2.8976 | $2.9330 | -9.00% | -0.57% | ||||||||
| (per gallon) | ||||||||||||
| Natural gas (-NG) | $2.6180 | $2.5000 | 14.57% | -12.41% | ||||||||
| (per mil. BTU) | ||||||||||||
| Unleaded gasoline (-RB) | $2.9209 | $2.9441 | -6.52% | 9.92% | ||||||||
| (per gallon) | ||||||||||||
| Brent crude | $111.71 | $112.24 | -6.55% | 4.03% | ||||||||
| (per barrel) | ||||||||||||
| Retail gasoline | $3.7280 | $3.7270 | -2.31% | 13.80% | ||||||||
| (per gallon; AAA) | ||||||||||||
Fed officials will act - but only if they have to
Federal Reserve officials in April fretted about U.S. fiscal policy and its impact on the economy, according to minutes of the Federal Open Market Committee's April 24-25 meeting.
Officials overall thought the economic outlook was still on a path of "moderate" economic growth that would gradually pick up.
Fed officials expected that the government sector would be a "drag on economic growth over coming quarters" and saw the U.S. fiscal situation as a "sizable risk."
While Fed officials have indicated there are no plans for new actions to spur economic growth, the minutes say, "several" officials "indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough," the minutes said.
Facebook expands number of shares to be sold in IPO
The Facebook IPO got a bit more exciting -- and perhaps more worrisome -- today after the company disclosed that the shares being sold are being expanded by nearly 25%. A number of early investors in the company are selling more of their shares than expected.
The worry is that investors selling now may be trying to maximize their profits because the IPO is expected to be so richly priced.
The company is still selling 180 million shares, with the IPO expected to price in the range of $34 to $38 a share.
The company is expected to price its IPO on Thursday, with trading starting Friday.
Internet stocks were rising today in advance of the IPO, including Google (GOOG), up $17.82 to $628.93; Yelp (YELP), up 80 cents to $21.60; and LinkedIn (LNKD), up $2.93 to $113.49. Game-developer Zynga (ZNGA), which gets most of its revenue from Facebook, dropped 34 cents to $8.22.
Why Greek worries shoot up
The worry about Greece hit the market after a report that the European Central Bank had "stopped monetary operations" to a number of Greek banks.
According to Seeking Alpha, the issue is more nuanced. The ECB move involves stopping direct assistance to four banks because their capital balances have gone into the red. Under ECB rules, the bank cannot lend to these banks. That means they must borrow through the Bank of Greece (which, in essence, borrows from the ECB). No one is being cut off.
Banks routinely borrow from other banks and central banks to fund their daily operations.
That said, the situation has not done much to improve the market's move.
Greek depositors have been pulling millions of euros from their banks because of concern over whether the nation will continue to use the euro as its currency or go back to its old currency, the drachma. Using the drachma would probably mean a massive devaluation of all Greek bank assets.
Separately, the Greek people will go to the polls on June 17 to try to come up with a result that allows the formation of a government.
Target rises on decent earnings; J.C. Penney is slammed
Target (TGT) shares rose 24 cents to $55.32. The discount retailer earned $697 million, or $1.04 a share, up from $689 million, or 99 cents a share, a year ago. First-quarter adjusted earnings were $1.11 a share. Analysts had anticipated a profit of $1.01 a share on revenue of $16.86 billion. Target said earlier this month that same-store sales rose 5.3% in the first quarter, its strongest quarterly performance in more than six years. Rival Wal-Mart Stores (WMT) reports on Thursday.
J.C. Penney (JCP) shares were off $6.57 to $26.75. The department-store chain reported a wider-than-expected quarterly adjusted loss of $55 million, or 25 cents a share, and said it is discontinuing its dividend, which had been 20 cents a quarter. J.C. Penney expects to have additional restructuring charges in 2012, so it dropped its outlook for GAAP earnings of $1.59 a share for the year. Cutting the dividend is expected to save J.C. Penney $175 million a year.
Office-products retailer Staples (SPLS) shares were off 84 cents to $13.91. The company earned $187.1 million, or 27 cents a share, in the fiscal first quarter, down from $198.2 million, or 28 cents, a year ago. Revenue was off 1% to $6.1 billion. The result included $28 million in pretax expenses, or 3 cents a share, related to staff cuts and a contractual dispute from the acquisition of Corporate Express. Analysts had expected 30 cents a share in earnings on $6.18 billion.
Teen retailer Abercrombie & Fitch (ANF) shares were off $5.90 to $39.50. The company earned $3 million, or 3 cents a share, in the fiscal first quarter, down from $25.1 million, or 28 cents a share, a year ago. The Street had expected 2 cents a share. Revenue of $921 million was up about 10% from a year ago, but the stock was hit because analysts had expected around $952 million.
Farm-machinery maker Deere (DE) shares were off $2.44 to $74.18 in the fiscal second quarter. The company earned $1.06 billion, or $2.61 a share, up from year-earlier profit of $904.3 million, or $2.12 a share. Analysts had expected $2.53 a share. Deere also raised earnings guidance for the year to $3.35 billion.
Housing construction shows signs of life
The Commerce Department's housing report today showed starts running at a seasonally adjusted rate of 717,000 housing units in April. That was up 2.6% from March and 29.9% above the April 2011 rate of 552,000. The single-family starts rate was up 2.3% from March and 18.8% from April 2011. Multi-family starts were up 4.3% from March and 75% from April 2011.
The report suggests starts are stabilizing, with the annualized rate above 700,000 in four of the last six months. March's revised rate was 699,000.
Permits were down slightly to a 715,000-unit rate from 769,000 in March but up 23% from April 2011, and permits were at the second-highest rate since 2008. Single-family permits were down 7% from March; that was expected by most analysts. Permits were up 18.5% from a year ago.
"The report shows further signs of life in the housing market," wrote economist Michelle Valverde of IHS Global Insight, "but the state of the single-family housing market, which represents two-thirds of the overall market, remains fragile."
Homebuilding stocks were mostly lower.
Separately, the number of homeowners who are delinquent on their mortgage continued to fall in the first quarter to 7.4% from 7.6% at the end of the fourth quarter.
While the news was welcome, wrote economist Paul Diggle of Capital Economics, the big picture hasn't changed: The large overhang of homeowners seriously delinquent or already in foreclosure has the potential to act as a break on the housing recovery.
Industrial production gains
The Federal Reserve said industrial production rose 1.1% in April, nearly double the expected 0.6% expected by economists, from a downwardly revised fall of 0.6% in March.
The report also said capacity utilization jumped to 79.2% for April from a downwardly revised 78.4% in March. April’s was the highest utilization rate since April 2008. It was better than the consensus estimate of 79%.
| Short hits from the markets -- New York close | ||||||||||||
| Wed. | Tues. | Month chg. | YTD chg. | |||||||||
| Treasury yields | ||||||||||||
| 13-week Treasury bill | 0.1000% | 0.080% | 11.11% | 900.00% | ||||||||
| 5-year Treasury note | 0.740% | 0.733% | -8.75% | -10.84% | ||||||||
| 10-year Treasury note | 1.765% | 1.777% | -7.83% | -5.67% | ||||||||
| 30-year Treasury bond | 2.906% | 2.931% | -6.53% | 0.59% | ||||||||
| Currencies | ||||||||||||
| U.S. Dollar Index | 81.524 | 81.380 | 3.39% | 1.24% | ||||||||
| British pound | 1.5921 | 1.6005 | -1.97% | 2.47% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in pounds | £0.628 | £0.625 | 2.01% | -2.41% | ||||||||
| Euro in dollars | $1.27 | $1.27 | -3.91% | -1.76% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in euros | € 0.786 | € 0.785 | 4.07% | 1.79% | ||||||||
| U.S. $ in yen | 80.39 | 80.23 | 0.48% | 4.26% | ||||||||
| U.S. $ in Chinese | 6.34 | 6.31 | 0.67% | 0.27% | ||||||||
| yuan | ||||||||||||
| Canada dollar | $0.988 | $0.994 | -2.45% | 0.76% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. dollar | $1.012 | $1.006 | 2.52% | -0.75% | ||||||||
| (in Canadian $) | ||||||||||||
| Commodities | ||||||||||||
| Gold (-GC) | $1,536.60 | $1,557.10 | -7.67% | -1.93% | ||||||||
| (per troy ounce) | ||||||||||||
| Copper (-HG) | $3.478 | $3.518 | -9.18% | 1.22% | ||||||||
| (per pound) | ||||||||||||
| Silver (-SI) | $27.1960 | $28.0800 | -12.32% | -2.58% | ||||||||
| (per troy ounce) | ||||||||||||
| Wheat (-ZW) | $6.3875 | $6.0850 | -2.41% | -2.14% | ||||||||
| (per bushel) | ||||||||||||
| Corn (-ZC) | $6.200 | $5.973 | -2.25% | -4.10% | ||||||||
| (per bushel) | ||||||||||||
| Cotton | $0.7697 | 0.7916 | -13.90% | -16.04% | ||||||||
| (per pound) | ||||||||||||
| Coffee | $1.7800 | 1.784 | -0.86% | -22.49% | ||||||||
| (per pound) | ||||||||||||
| Crude oil (-CL) | $92.81 | $93.98 | -11.50% | -6.09% | ||||||||
| (per barrel) | ||||||||||||
The US will be there soon enough. We cannot keep printing pretend money to 'buy our way out of debt and continue to see the dollar being a safe refuge of investment by the rest off the world. If Bernanke prints more money in the form of QE (which the idiot probably will) it will spell the decline of the dollar
and then we are really done. Compressive deflationary contraction: we need to start doing more with less and come to the understanding that growth is done. Time to STOP BAILING OUT THE BANKS, take our lumps and get the collapse under way. If we don't manage it, it will manage us.
What upsets the heck out of the good people down here is that the SEC is fully aware of the manipulation and the insider trading that goes on; its nothing new, its been happening forever but not at the magnitude that goes on now. You see, the SEC is completely worthless, just think Madoff, and another very important fact, what do you think happens with these SEC inepts when they leave the agency or move on? They will be down here begging for jobs so they don't want to bite the hand that may feed them in the future...Its a no win situation for every honest person down here and yes, there are plenty of good ones....Oh well...Back to the same bs tomorrow.
1. Bi-polar Greek government at it again.
2. Oil down below $93 a barrel...When will we see gas prices fall?
3. "The large overhang of homeowners seriously delinquent or already in foreclosure has the potential to act as a break on the housing recovery." Really...?
4. You can't "spur economic growth" when you continue to rely on the same working class of people to spend more. We are already stretched to our credit limit, have family members living with us because they were layed off, and no one is hiring. you can spur economic growth by hiring more people, who spend more, and pay there taxes. Hello? Anyone listening in the District of Columbia?
5. Someone in DC listen to the collective shouting from Americans, "Do your job and get us out of this mess."
yes....where is uncle ben ......to save the day.
His low interest rates did absolutely nothing to help the economy.....rather they hurt the economy by providing no income to savers. With no income from CD's and bonds.....retires and savers have no money to SPEND......and grow the economy.
Bernanke is a real stupid F###
Brent is down, West Texas Crude is down, wholesale unleaded is down...so why the hell did retail prices creep up? Demand is down; the forecast for gas useage shows a drop in usage on top of the steady drop over the past 9 weeks. So why the hell did retail unleaded price creep up? Every single indicator points to retail gasolin prices going down. Brent crude, which is the price refiners use is down 6.6% for the month; unleaded wholesale price down 6.5% for the month; retail gas only down 2.3%. Is it just me or are we getting totally screwed by big oil and our government! Yipee...way to go oBUMa! I'll take 4 more years of that!
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