Dow drops 258 as 4th quarter starts with a thud

Stocks crumble as fears build that Greece will default and recession is inevitable. European and US bank stocks fall. US manufacturing and auto sales are fairly strong. Crude oil drops again; gold moves higher.

By Charley Blaine Oct 3, 2011 2:22PM
Charley BlaineUpdated: 2:25 a.m. ET, Tuesday

Stocks closed at their lowest levels in more than a year Monday, continuing the weakness that has plagued the market for months.

The big issues: continuing worries that Europe's banking and financial system faces dire threats from Greece's debt problems, fear of a slowing economy in China and the threat of a new recession in the United States.

Investors ignored decent U.S. auto sales in September and upticks in construction spending and manufacturing as the U.S. economy was signaling that reports of its demise may be premature. Many analysts believe, however, that a recession is near.

Crude oil (-CL) was lower as the concerns about the global economy grew. Gold (-GC) and U.S. Treasury bonds gained (and interest rates moved lower) as investors sought safety.

The Dow Jones industrials ($INDU) were off 258 points, or 2.4%, to 10,655. The Standard & Poor's 500 Index ($INX) was down 32 points, or 2.9%, to 1,099. The Nasdaq Composite Index ($COMPX) was off 80 points, or 3.3%, to 2,336. The Nasdaq-100 Index ($NDX), which tracks the largest Nasdaq stocks, was down 54 points, or 2.5%, to 2,085.

Article continues below.
The losses were the third for the Dow and S&P 500 in four sessions and fourth in a row for the Nasdaq. Stocks are coming off a weak September and a miserable third quarter, the worst quarter since the 2008-09 financial crisis.

Monday's slide of the S&P 500 -- its lowest close since Sept. 8, 2010 -- was especially bothersome. The index fell below 1,101.54, which had been its intraday low since the market peak on April 29. That could signal a continuing decline to 1,050.

The Dow's close was its lowest since Sept. 17, 2010. The Nasdaq's close was its lowest since Sept. 23, 2010. The Dow is off 8% for the year, with the S&P 500 down 12.6% and the Nasdaq off 12%.

The indexes are off 16.8%, 19.4% and 18.7%, respectively, since peaking on April 29. A decline of 20% is the definition of a bear market; the S&P 500 is nearly there.

Tuesday's market will contend with a report on factory orders and earnings after the close and earnings from Yum! Brands (YUM). Federal Reserve Chairman Ben Bernanke will testify before the Joint Economic Committee.

Apple (AAPL) will unveil its iPhone 5, and reports said most of the new devices will go to Sprint (S).

A new version of the iPhone 4 -- an iPhone 4GS -- would be marketed by AT&T (T) and Verizon Wireless. Later, they would get the iPhone 5. Apple fell 1.8% to $374.60 on Monday. Sprint, which has committed to buy 30.5 million devices and won't make any money from them until 2014, was off 10.2% to $2.73.

Futures trading suggests that stocks will open higher on Tuesday. Japanese saw losses trimmed near the close of Tuesday trading. Down as many as 186 points, the Nikkei 225 Index ($JP:N225) finished off 89 points to 8,456.

Gold moves up, crude drops
Gold settled up $35.40 to $1,657.70 an ounce. Silver (-SI) rose 71.2 cents to $30.795 an ounce. Copper (-HG), however, dropped slightly to $3.1505 a pound.

Crude oil settled down $1.09 a barrel to $77.61 in New York, its lowest close since Sept. 10, 2010. Brent crude in London settled down $1.05 to $101.71. That the lowest close for Brent since Feb. 15.

Crude is off 31.9% since peaking at $113.93 a barrel on April 29. Retail gasoline was at $3.417 a gallon, AAA's Daily Fuel Gauge Report said. That's down 14.3% since peaking at $3.985 a gallon.

The dollar was higher against the euro and the pound but lower against the yen. The U.S. Dollar Index, which measures the greenback against a basket of currencies, rose to 79.94. It ended the day up 0.8% for the year. That's the first time the index has been up for the year since Jan. 14.

Energy prices -- New York close



Mon.

Fri.

Month chg.

YTD chg.
Crude oil (-CL)

$77.61

$79.20

-2.01%

-15.07%
(per barrel)











Heating oil (-HO)

$2.7529

$2.7793

-0.95%

8.22%
(per gallon)











Natural gas (-NG)

$3.6170

$3.6660

-1.34%

-17.89%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.5110

$2.5381

-1.07%

2.36%
(per gallon)











Brent crude 

$101.71

$102.76

-1.02%

7.35%
(per barrel)











Retail gasoline

$3.4170

$3.4240

-0.81%

11.23%
(per gallon; AAA)












AMR heading for bankruptcy?
The market worried as American Airlines parent AMR (AMR) fell 33.1% to $1.98 on reports it might be filing for bankruptcy. Circuit breakers halted trading Monday as many as six times.

Investors are concerned that American, the third-biggest U.S. airline, will burn through its cash reserves without deeper cuts in costs and seating capacity, aviation analyst Ray Neidl told Bloomberg News. The shares touched the lowest price since March 31, 2003, and had fallen 62% this year before Monday.

More than 200 pilots have retired from AMR in the last two months, compared with a typical monthly dozen, news reports say.

The worries about AMR hit rival carriers as well. US Airways (LCC) tumbled 15.8% to $4.63; Delta Air Lines (DAL) was down 11.3% to $6.65; and United Continental Holdings (UAL), the parent of United Airlines and Continental Airlines, dropped 11.7% to $17.11. Southwest Airlines (LUV) slid 8.6% to $7.35.

Also Monday, Citigroup analysts cut their ratings on US Airways and United Continental.

European debt situation gets worse

The Greece situation moved from awful to seriously bad late Sunday when the government said its deficit this year would be close to 8.5% of its gross domestic product. The country needs to cut its deficit to 7.6% of its GDP to keep receiving aid from the International Monetary Fund, the European Union and the European Central Bank.

The news pushed European stocks lower, with European banks especially pressured. Shares of Dexia, a Belgian-French bank, slid as much as 14% on worries that it will need a second bailout from France and Belgium. It is reported to have the greatest exposure to Greek bonds. France's Societe Generale (SCGLY) fell 7.3% to $4.85. BNP Parisbas (BNPQY) was down 7.9% to $18.15.

The worries spread to U.S. banks. JPMorgan Chase (JPM) was down 4.9% to $28.65. Morgan Stanley (MS) was off 7.7% to $12.47. It is believed to have some sizable exposure to Europe.

Bank of America (BAC) was down 9.6% to $5.53, a 52-week low. The bank announced last week it wanted to impose a $5 fee for use of its debit cards. The banking giant's website was down again Monday after crashing on Friday.

The KBW Bank Index ($BKX) was down 4.8% to 33.65, a 52-week low.

Pretty strong auto sales
The news on auto sales: not bad. Total deliveries were up 9.9% from a year ago and 1.7% from August. The seasonally adjusted sales rate of 13.1 million vehicles was the best since April and third-best monthly sales rate of the year.

General Motors (GM), Ford Motor (F) and Chrysler Group said September U.S. sales rose more than analysts’ estimates. GM and Chrysler sales were helped by stronger-than-expected sales of Silverado pickups and Durango sport-utility vehicles.

Ford said its light-vehicle sales increased 9% to 174,860. GM said its deliveries rose 20% to 207,145 cars and light trucks in the U.S. last month. Chrysler sales climbed 27% to 127,334, according to a regulatory filing.

Volkswagen (VLKAY) and Nissan (NSANY) also reported sales gains of 36% and 25%, respectively. Toyota (TM) and Honda (HMC) reported lower sales, but Kia and Hyundai reported gains.

Analysts have said September light-vehicle sales will probably rise to a seasonally adjusted annual rate of 12.8 million. That would be the fastest pace since April, when production slumped after Japan's March 11 earthquake and tsunami crimped supply of parts and finished cars.

U.S. manufacturing is still growing
The good news on U.S. manufacturing, according to the Institute for Supply Management Monday, is that it's still growing. But the growth rate has slid substantially from spring.

The ISM's Manufacturing Index came in at 51.6, up from August's 50.6. A reading above 50 signals growth. But the index is down from a high of 61.4 in February, just before the Japanese earthquake.

The report "demonstrates that the economy hasn't fallen off a cliff (at least not yet)," wrote Paul Ashworth of Capital Research in Toronto. But the report also suggests an economy that experiencing anemic growth at best, he added.

Michael Darda at MKM Partners was more downbeat. New orders are running below inventories for the fourth consecutive month, he noted. Next, China’s September purchasing managers' index showed the second-weakest month-to-month change on record. And September tends to be a seasonally strong month.

And then of course there are the stressed-out credit and financial markets.

Not a lot to cheer about
Only one of the 30 Dow stocks was higher: Wal-Mart Stores (WMT), up 0.1% to $51.96. Bank of America was the laggard.

Meanwhile, 13 S&P 500 stocks were higher, led by cigarette-maker Lorillard (LO), up 2% to $112.94, and Yahoo (YHOO), up 2.7% to $13.53. Over the weekend, Jack Ma, the CEO of Alibaba, said he'd be interested in buying the Internet company. Yahoo owns more than 40% of Alibaba.

Yahoo was also the best-performer among Nasdaq-100 stocks. Only four stocks in the index were higher. The others were Research In Motion (RIMM), Activision Blizzard (ATVI) and Vodaphone (VOD). The laggard was Micron Technology (MU), down 14.1% to $4.33.

Short hits from the markets -- New York close



Mon.

Fri.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0100%

0.020%

-50.00%

-91.67%
5-year Treasury note 

0.875%

0.965%

-9.33%

-56.60%
10-year Treasury note

1.785%

1.924%

-7.22%

-45.99%
30-year Treasury bond

2.761%

2.921%

-5.48%

-36.70%
Currencies











U.S. Dollar Index

79.937

79.075

1.09%

0.82%
British pound

1.5470

1.5579

-0.70%

-0.87%
(in U.S. $)











U.S. $ in pounds

£0.646

£0.642

0.70%

0.87%
Euro in dollars

$1.33

$1.33

-0.58%

-0.85%
(in U.S. $)











U.S. $ in euros

€ 0.754

€ 0.749

0.59%

0.86%
U.S. $ in yen 

76.86

77.13

-0.34%

-5.53%
U.S. $ in Chinese

6.40

6.38

0.28%

-3.31%
yuan











Canada dollar

$0.955

$0.955

0.04%

-4.80%
(in U.S. $)











U.S. dollar 

$1.053

$1.047

0.57%

5.60%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,657.70

$1,622.30

2.18%

16.62%
(per troy ounce)











Copper (-HG)

$3.151

$3.152

-0.05%

-29.15%
(per pound)











Silver (-SI)

$30.7950

$30.0830

2.37%

-0.46%
(per troy ounce)











Wheat (-ZW)

$6.1950

$6.0925

1.68%

-22.00%
(per bushel)











Corn (-ZC)

$5.9250

5.925

0.00%

-4.82%
(per bushel)











Cotton 

$0.9921

1.0019

-0.98%

-31.49%
(per pound)











Coffee

$2.2345

2.289

-2.38%

-7.09%
(per pound)











Crude oil (-CL)

$77.61

$79.20

-2.01%

-15.07%
(per barrel)










 

202Comments
Oct 3, 2011 5:23PM
avatar
Recession inevitable? We are freaking LIVING recession right now! It never ended damned fools!
Oct 3, 2011 4:21PM
avatar
Oil is down to $77 a barrel, why are the pump price $3.65 STILL???????
Oct 3, 2011 2:51PM
avatar
Anybody else sick of this Greece garbage?  Let them default and go away.  I am sick of hearing about them and their detremental effect on the market. It's like an old shoe no one wants to throw out.
Oct 3, 2011 5:24PM
avatar

"Greece will default and recession is inevitable"  Does this mean just Greece or globaly?

"Manufacturing (of luxury boats and cars) are fairly strong"...the rich decided to upgrade.

 

Would be interesting with these fictitious jobs and unemployment reports to know if they take into account the people who ran out of benefits and now are homeless, or  moved in with family members to survive.

Oct 3, 2011 2:56PM
avatar

Now we have to worry about the economy of other countries.

 

What the hell is going on here?

Oct 3, 2011 5:35PM
avatar

No problem .... Obama has everything under control!!!!!

 

"Barry's legacy will be"

"The worst President in history"

Oct 3, 2011 3:40PM
avatar

The only decent thing happening on wall street is the young protesters. We need millions in the streets with good leadership and specific demands.

   Our big banks with trillions in assets have been getting billions in 0% loans to play the market. The lowlife pigs have been manipulating the commodities market and driving up the price of gas and food on our hurting people.

   All government guaranteed loans should be made directly for a low interest. This would reduce house notes by half or more and leave trillions in the hands of our people instead of thieving banks. Why should anyone pay a bank 600k for a 200k house when the tax payer backs the loan?

   We should force our public owned corporations to pay our minimum wages wherever they go. This would bring back jobs and show a little regard for workers.

   We will do nothing without force from the people; Because. both parties are owned and banks, wall street and big corporations run America. We need to support our young protesters in ever way. Ten or twenty million in the streets might save us from depression and chaos.

Oct 3, 2011 6:14PM
avatar

"Crude is off 31.9% since peaking at $113.93 a barrel on April 29. Retail gasoline was at $3.417 a gallon, AAA's Daily Fuel Gage Report said. That's down 14.3% since peaking at $3.985 a gallon."

 

So shouldn't I be paying 33% less in gas?? Ohhh that's right.. despite the downturn the fuel companies has to post those amazing every quarter is better than the last quarter in profits.. and how much do they pay in taxes again........

Oct 3, 2011 5:24PM
avatar

Very well stated Jimmy Sub,

 

I agree. Our financial systems must ompletly collaspe before things get on the right track again. I agree we also must completly close our goverment and restructure to improve as well. We pay them handsomely to do a job for the American people, now start doing it and quit spending our precious time with your preliminary election champaigns and get back to work in which you are paid by the American people to do so.

Oct 3, 2011 5:21PM
avatar
There has never been a country in the world that has been taxed into prosperity  Something we've got to do is, send someone into the Federal Reserve to see if there's enough Gold to cover all this Paper that's floating around..    Something we need to think about..
Oct 3, 2011 5:55PM
avatar
Charley, why don't you highlight the fact that oil is DOWN about 15% for the year and gasoline is UP about 11% for the year? 
avatar

Economy Fix:

 

Every, law, subsidy, presidential order, bailout, incentive plan, tax credit, handout (national and especially international)......​...............THAT WERE FORCED THROUGH WITHOUT FUNDING

....................................need​ to be voided in reverse chronological order until the budget # equals what the nation provides the government with ..............the only fair way. 

Oct 3, 2011 3:02PM
avatar
I didn't realize that Greece bought so much of our crap as to help collapse our markets. Analyze all you want, I smell what you're stepping in.
Oct 3, 2011 4:54PM
avatar

All of you out there who blame Business for going over seas, one question, Have you ever started your own Business? Matching Social Security, Plus 2.9% for Medicare.

How come you keep hearing Democrats talk about cutting SS. That my friends is to SCARE Seniors. People who have paid into the system. How come you never hear them talk about cutting Welfare and Medicaid on people who never pay into the system.

I am on SS and it make me mad every time they TAX my Social Security. Thank you BILL CLINTON. 

Also about NAFTA, again Thank you BILL CLINTON who signed it into LAW. So who is sending Big Business over seas.

How about Pelosi's Husband ,has a TUNA Canning business on some ISLAND and was EXCLUDED on paying MINIMUM WAGES. hehehehehehehehe

BUT its BUSH and the REPUBLICANS who are for BIG BUSINESS.

Oct 3, 2011 5:20PM
avatar
Recession inevitable? We are freaking LIVING recession right now! It never ended damned fools!
avatar
European countries are super proud, and will not let their markets fail...no matter what. 
ROFL, the Europeans along with the US and Japan are in vicious cycles that can not now be broken. The central banks have crossed the Rubicon and for better or worse they have created an impossible situation for Europe, the US and Japan to get out of. 

Welcome to the total collapse of the western economies and there is nothing the central banks can do about it and everything they are doing now is making it worse and worse.


Oct 3, 2011 5:51PM
avatar
Yeah 4 more years or longer of obama and his successful administration of czars. His policies have been spot on, his economic outlook and wise spending have all contributed to the outstanding unemployment rate. All of you marxist's must be very proud your president and soon to be dictator cause he aint letting go of the power he currently has. His work is not finished with the Nation he intends on seeing crippled and destitute.
Oct 3, 2011 4:04PM
avatar
Yawn, blame Greece as if anyone in the USA cares one iota what Greece is doing.  How about point the finger where it belongs, an inexperienced inept President with a lame duck cabinet and the spending habits of a drunken sailor.  Sorry sailors, just an expression.  
Oct 3, 2011 3:07PM
avatar
Yeah I really fell sorry for you greedy bastards on wall street, What I see is gas prices dropping and that's cool with me.
Oct 3, 2011 4:32PM
avatar

dujoman,

 

What we have is NOT Socialism, its Fascism (the merger of state and corporate power) . Isn't it funny when the big banks need help they get it (corporate socialism) when the people or small business's do we are to small to save.

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