Dow falls 49 after Fed minutes disappoint
The blue chips are briefly down as many as 119 points as Federal Reserve officials see the current slowdown as transitory. They will act if conditions deteriorate. Marriott warns about growth in Asia. Supervalu suspends its dividend.
By Charley Blaine Jul 11, 2012 12:49PM
Updated: 6:40 p.m. ETStocks abruptly slumped after minutes from the June 19-20 Federal Reserve meeting offered few hints that the Fed is preparing a major new initiative to boost the economy in the near future. The Dow Jones industrials ($INDU) tumbled as many as 119 points before a sizable rebound set in.
At best, the minutes show, the Federal Open Market Committee would move if the domestic economy goes into a serious tailspin. That wasn't even close to happening at the time of the meeting. While the FOMC, the Fed's policy-making body, saw that solid growth in the first quarter faded in April and May, the members judged that the slowness might be transitory.
But there were big risks to that outlook: the "fiscal and financial strains in Europe" and what might occur if Congress can't agree on tax and spending policies before January when the Bush tax cuts are to expire and massive spending cuts could kick in.
Stocks had traded basically flat ahead of the release of the minutes and dropped quickly after they were made available.
The Dow closed down 49 points to 12,605. The Standard & Poor's 500 Index ($INX) was down -- barely -- at 1,341, and the Nasdaq Composite Index ($COMPX) dropped 14 points to 2,888.
Article continues below.
The Nasdaq-100 Index ($NDX) fell 15 points to 2,571.
The S&P 500, with its loss of two hundredths of a point, and the Dow suffered their fifth losses in a row, their longest losing streaks since falling for six straight sessions between May 11 and May 18. The Nasdaq ended with its fourth straight loss, its longest losing streak since falling for five straight days May 14-18.
But the declines have not been backbreakers. The Dow and S&P 500 are off 2.3% since July 3; the Nasdaq has been hit harder, down 3% since July 5.
The big report on Thursday is the government's weekly report on jobless claims. Futures trading suggests a modestly higher open for stocks.
Warnings from Marriott and Supervalu
But the market may be worried by a warning from Marriott International (MAR) that demand growth in Asia and the Middle East may be slowing, particularly among its luxury hotels, which include the Ritz-Carlton, Marriott Resort and Renaissance chains. Marriott's domestic business, however, is expected to grow 6% to 8% for the year. Marriott earned 42 cents a share, up from 37 cents a year ago.
A second issue may be supermarket chain Supervalu (SVU), whose shares fell 26.3% after hours to $3.90. Shares finished the regular session at $5.29, up 14 cents. The company has struggled against increasing competition from Wal-Mart Stores (WMT), Target (TGT) and others.
The company, operator of Albertsons, Jewel-Osco, Save-A-Lot and other stores, suspended its dividend and said it was reviewing its options. That could mean it puts itself up for sale.
The company saw fiscal-first-quarter earnings fall 45% to 19 cents a share from a year ago. Revenue fell 4.7% to $10.59 billion and missed the Street estimate of $10.6 billion.
Energy, financials lead the market
The market was boosted by gains in energy and financial stocks. Bank of America (BAC), Exxon Mobil (XOM), Chevron (CVX) and JPMorgan Chase (JPM) were among the top five performers among the 30 Dow stocks.
Technology stocks drooped with Apple (AAPL), Google (GOOG), Microsoft (MSFT) and Qualcomm (QCOM) all lower. Retail and material shares also moved lower. (Microsoft publishes MSN Money.)
A big exception: Hewlett-Packard (HPQ) was up 58 cents to $19.69 on the strength of winning a number of new contracts. One is a contract to automate the management and quality control of the information technology networks for Russian Railways.
JPMorgan shares were up 34 cents to $34.59 in part because The Wall Street Journal said the banking giant will announce Friday it is taking back bonuses given to executives involved in the big trading loss disclosed in May. The announcement is expected as part of Morgan's second-quarter earnings report.
Meanwhile, electronic retailer HHGregg (HGG) shares were down $4.20 to $7.34 after the appliance and electronics company slashed its full-year forecast and cut its guidance for the fiscal first quarter. The shares are off 50% so far this year. Radio Shack (RSH) was off a penny to $3.90, and Best Buy (BBY) dropped $1.77 to $19.37.
Health care stocks were mostly higher after the House of Representatives voted for the 32nd time to repeal the Healthcare Reform Act. The vote is symbolic. The Senate probably won't take the bill up, and President Obama has vowed to repeal the legislation.
The Health Care Select Sector SPDR (XLV) exchange-traded fund was off 3 cents to $37.62. The ETF tracks the stocks in the S&P 500 health care sector. Thirty-two of the 52 stocks in the sector were higher, led by Boston Scientific (BSX), up 11 cents to $5.62.
| Energy prices -- New York close | ||||||||||||
| Wed. | Tues. | Month chg. | YTD chg. | |||||||||
| Crude oil (-CL) | $85.81 | $83.91 | 1.00% | -13.17% | ||||||||
| (per barrel) | ||||||||||||
| Heating oil (-HO) | $2.7618 | $2.7195 | 1.92% | -5.23% | ||||||||
| (per gallon) | ||||||||||||
| Natural gas (-NG) | $2.8530 | $2.7370 | 1.03% | -4.55% | ||||||||
| (per mil. BTU) | ||||||||||||
| Unleaded gasoline (-RB) | $2.7689 | $2.7469 | 5.21% | 4.20% | ||||||||
| (per gallon) | ||||||||||||
| Brent crude | $100.23 | $97.97 | 2.48% | -6.66% | ||||||||
| (per barrel) | ||||||||||||
| Retail gasoline | $3.3830 | $3.3810 | 0.89% | 3.27% | ||||||||
| (per gallon; AAA) | ||||||||||||
What the Fed minutes show
So far, the Fed has said basically that it stands ready to do something about the economy if conditions warrant. But the central bank hasn't defined what those conditions might be. The minutes released today offer one condition: If overall inflation drops below 2% a year for an extended period.
The minutes also suggest talk is building about letting interest rates remain at "exceptionally low levels" beyond late 2014. There's been a fair amount of speculation that the Fed may push that into 2015. The Fed's all-important interest rate target -- the federal funds rate -- is at 0% to 0.25%.
The Fed is scheduled to meet again July 31 and Aug. 1.
The expectation that the Fed might act increased after last week's jobs report that showed nonfarm payrolls rising a seasonally adjusted 80,000, less than expected. In addition, reports on manufacturing and consumer confidence have suggested a weakening economy.
Last week, the European Central Bank cut its base rate, and the Bank of England announced its own round of quantitative easing. The Fed itself is buying $44 billion a month in short-term securities and selling an equal amount of longer-term bonds through the end of the year.
Crude oil jumps, gold slips
Crude oil (-CL) settled up $1.90 to $85.81 a barrel. Brent crude was up $2.42 to $100.59. The Energy Department reported that crude supplies dropped and refineries operated at the highest rate in almost five years.
The national average price of regular unleaded gasoline was at $3.383 a gallon, up slightly from Tuesday's $3.381 and up from $3.358 on Friday.
Gold (-GC) slipped $4.10 to settle at $1,575.70 an ounce.
Interest rates were a touch higher, with the 10-year Treasury yield hitting 1.503%, up from 1.498% on Tuesday. The dollar was higher against major currencies. The euro fell to $1.2223 from Tuesday's $1.2256.
The Agriculture Department cut its corn-harvest estimate by 12% and said inventories next year will be smaller than forecast in June as the worst Midwest drought since 1988 erodes prospects for a record crop. Corn (-ZC) for December delivery jumped to as high as $7.49 a bushel after the report was released, but profit-taking pushed the price back to $7.04 a bushel at the close, down 13.5 cents.
Microsoft may be sellling its stake in MSNBC.com
After the close, The Daily Beast's Howard Kurtz reported that Microsoft and NBC have decided to end their partnership operating the MSNBC.com news site, which is based on Microsoft's corporate campus in Redmond, Wash.
Kurtz's report suggest NBC will buy out Microsoft's stake and will continue to operate the site as NBCNews.com.
A renegotiation has been expected since the companies ended their partnership operating the MSNBC cable channel in 2005 and NBC was acquired by Comcast in 2009.
| Short hits from the markets -- New York close | ||||||||||||
| Wed. | Tues. | Month chg. | YTD chg. | |||||||||
| Treasury yields | ||||||||||||
| 13-week Treasury bill | 0.0900% | 0.080% | 12.50% | 800.00% | ||||||||
| 5-year Treasury note | 0.628% | 0.619% | -13.85% | -24.34% | ||||||||
| 10-year Treasury note | 1.498% | 1.498% | -9.70% | -19.94% | ||||||||
| 30-year Treasury bond | 2.589% | 2.594% | -6.30% | -10.38% | ||||||||
| Currencies | ||||||||||||
| U.S. Dollar Index | 83.728 | 83.559 | 2.42% | 3.98% | ||||||||
| British pound | 1.5509 | 1.5523 | -1.24% | -0.19% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in pounds | £0.645 | £0.644 | 1.26% | 0.19% | ||||||||
| Euro in dollars | $1.22 | $1.23 | -2.98% | -5.47% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in euros | € 0.816 | € 0.816 | 3.07% | 5.79% | ||||||||
| U.S. $ in yen | 79.81 | 79.40 | 0.08% | 3.51% | ||||||||
| U.S. $ in Chinese | 6.39 | 6.36 | 0.34% | 1.07% | ||||||||
| yuan | ||||||||||||
| Canada dollar | $0.981 | $0.978 | -0.14% | 0.01% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. dollar | $1.020 | $1.022 | 0.14% | -0.01% | ||||||||
| (in Canadian $) | ||||||||||||
| Commodities | ||||||||||||
| Gold (-GC) | $1,575.70 | $1,579.80 | -1.78% | 0.57% | ||||||||
| (per troy ounce) | ||||||||||||
| Copper (-HG) | $3.448 | $3.398 | -1.40% | 0.33% | ||||||||
| (per pound) | ||||||||||||
| Silver (-SI) | $27.0230 | $26.8820 | -2.13% | -3.20% | ||||||||
| (per troy ounce) | ||||||||||||
| Wheat (-ZW) | $8.2625 | $8.2125 | 9.11% | 26.58% | ||||||||
| (per bushel) | ||||||||||||
| Corn (-ZC) | $7.0400 | $7.175 | 10.91% | 8.89% | ||||||||
| (per bushel) | ||||||||||||
| Cotton | $0.7102 | 0.7072 | -0.43% | -22.53% | ||||||||
| (per pound) | ||||||||||||
| Coffee | $1.847 | 1.845 | 8.20% | -19.57% | ||||||||
| (per pound) | ||||||||||||
| Crude oil (-CL) | $85.81 | $83.91 | 1.00% | -13.17% | ||||||||
| (per barrel) | ||||||||||||
55Comments
Jul 11, 2012 1:12PM
Jul 11, 2012 1:07PM
Jul 11, 2012 1:15PM
Jul 11, 2012 10:58PM
Jul 11, 2012 11:01PM
I was aware that Wall Street was incapable of doing anything that didn't benefit itself. But now I can see that the same feelings affect most all forms of the US government also. The house has voted to repeal (for the 30th time) a law which by polls most Americans seem to be in favor of.
There was a time when Wall Street traders attempted to get the best deals for their clients, almost like it was their job to do so, and congress followed the will of their constituents and not their own compass.
Fatten your own wallet and get the candidate you want in office regardless of whatever laws you need break or toes you step on, personal gain is king and to hell with everything else.
Jul 11, 2012 11:21PM
Jul 11, 2012 11:23PM
One of the few useful things about it, is that the gains by the winners are taxed to provide income to the government. Otherwise, the government won't get any additional income from the wealth class since they don't spend their wealth, but will "invest." When some of the wealth class makes money; the government gets a cut. The losers pound sand or offset the loses with other gains if they have any. Also since WS sold the public on betting on equities to generate a retirement nest egg (since there's practically are no pensions anymore), a lot of little people are on the gaming table as well, but mostly as the patsies to feed the sharks.
Jul 11, 2012 11:06PM
Jul 12, 2012 12:55AM
Jul 11, 2012 11:53PM
it not make any sense for the fed to give money to wall st anymore its not going to benefit the economy this is a a sick institution that need injection of morphine all the time let the corporation borrow money from the banks the interest rate is very low and the investor should look for other future for there money may be the corporations will have more responsibility to the loans and they use there head better because banks can take over if they don't pay is not like the stock that the investor loose and they don't owe nothing anymore
Jul 12, 2012 2:27AM
The "best" is yet to come. It will not be fun! We asked for it and we 'have' it. Never ever elect someone as president that is a known socialist. He is in the process of destoying our nation and is not even born here. This will all come out. The Clinton's....could have vetted him at any time.
Now, that is a trip in itself! How is this "world' order going now? Sure, the Bushs' know ****, also. Time for a complete revampimg and get the Chicago thugs out....did I say Kennedy? At least he had guts!
Jul 12, 2012 7:34AM
Jul 12, 2012 6:55AM
So wall street was looking for another handout and didn't get it! So they have to make stocks go down and punish the stockholders! What a scam! Speculation needs to be stopped and lobbiests need to be outlawed! The Glass/Stegal act needs to be put back in place and make banks be banks once again! The only way this economy is going to recover is to have more people working and making more than minimum wages! Until people have extra money to spend the same cycle will continue! Stop the tax breaks for those so called "Job Creators". I see that the only place they create jobs are in Switzerland, the Cayman Islands or Bermuda! Tax the heck out of any company that produces goods overseas and sells them here!
Jul 12, 2012 4:22AM
Jul 11, 2012 1:30PM
Manipulators selling on every rally attempted, that's why you don't see the market improve; and to make things worse, they called to accelerate the selling at 1315 hrs....Like we said last night, if these scumbags take over again we are headed to the 5th day down in a row...Looks like it so far...Sad.
Jul 12, 2012 9:33AM
>>>>> "fiddling, while Rome burns."<<<<
so very true. a total lack of ideas from the entire gang in office.
first, obama spends time on the health care plan while our economy dies. THEN the republicans spend time trashing the health care plan while the economy dies.
it's the modern way of re-arraigning deck chairs
Jul 12, 2012 12:21AM
A major part of our economy is being affected by Obamacare. Its a great perk and a benefit in theory. The morons pulling the strings are too removed from reality to know we can't afford the risk and change. We need a few adults in Congress to say, Hold that thought till we get the finances in the black again folks. We don't need another perpetual Ponzi scheme with the blessing of a corrupt congress and a neutered supreme court. I hope I am wrong but past history and common sense tells me I'm screwed by my country's edicts.
Jul 12, 2012 8:43AM
It is amazing that the Libor scandal happened on Obama's watch, this after 4500 new regulators, Dodd/Frank, etc. It will be interesting to see what Geitner knew and when, and why the government here has done NOTHING to date. If the treasury new this was going on, why did the Obama administration take no action for over a year? Once again our huge regulatory army was asleep at the switch or too busy watching porn. I do find it hard to believe given all the Fed's bank investigations that they didn't find this.
What did Geitner know and when, and why did he do nothing about it? Maybe the question should be why, even now, is Obama doing NOTHING? Just more incompetence I guess...
Jul 12, 2012 10:17AM
No surprises at all this morning, like we said last night, they dropped us easily for 5 days in a row, why not make it 6...Forget the Fed, its not his fault...Markets being manipulated as usual by the same crooks that know they can and will get away with it....We see it day in and day out and today is no exception.They will push and push as far as they can...Be aware, they will have sucker's rallies, they always do, they need them before they resume their selling...Do not fall for them...Another good day to stay on the sidelines and wait for opportunities...Just...Sad.
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