Stocks slide after flirting with 2008 levels

Stocks open to levels last seen in the spring of 2008, but the Dow falls 22 on profit-taking and worries about the economy. Caterpillar and Netflix are the leaders. Apple briefly hits a new high. Starbucks results disappoint.

By Charley Blaine Jan 26, 2012 2:33PM
Charley BlaineUpdated: 8:58 p.m. ET

Stocks opened higher today and pushed to levels last seen in the spring of 2008 before falling back on economic worries.

The initial surge was set off by a combination of strong earnings from Caterpillar (CAT) and Netflix (NFLX) and the after-glow of the Federal Reserve's projection that it may not have to raise interest rates until late 2014.

The Dow Jones industrials ($INDU) briefly touched levels last seen in May 2008. Crude oil (-CL) moved above $100 a barrel, and gold (-GC) pushed well above $1,700 an ounce.

But reports of weaker-than-expected new-home sales in December (and the worst year on record) and a bump higher of initial jobless claims gave skeptics an opening to sell the market lower. And sell they did. Apple (AAPL) and Starbucks (SBUX) were two of a number of stocks that hit new all-time highs but sold off. Apple sold off during the regular session. Starbucks was lower after releasing fiscal-first-quarter earnings after the close.

The Dow closed down 22 points to 12,735. The blue chips had been up as many as 85 points to 12,842 by 9:55 a.m. ET. The Standard & Poor's 500 Index ($INX) was down 8 points to 1,318 after reaching as high as 1,333. The Nasdaq Composite Index ($COMPX) was off 13 points to 2,805. The Nasdaq-100 Index ($NDX), which tracks the largest Nasdaq stocks, was off 11 points to 2,455.

Article continues below.
The market's January rally has pushed the major indexes to levels not seen since mid-2008. The reason for the gains -- at least until today -- were signals the economy was strengthening and could see a decent year in 2012.

Unemployment has fallen below under 9%. Housing looks as if it may be bottoming, despite the huge inventories of foreclosed homes that lenders carry. Manufacturing has been one of the economy's brightest sectors. Automakers are selling cars. Mike Jackson, the CEO of Autonation (AN), told CNBC today that domestic auto sales would top 14 million units this year. 

The auto retailer saw record company revenue of $3.7 billion and earnings of 51 cents a share, Jackson said, with the biggest increase coming in new vehicles. Shares were up 48 cents to $36.82.

Jackson based his bullishness on "leaner inventories" from automakers and, more importantly, "production that is coming in much closer aligned to what consumers actually want."

But much of the good cheer was tempered by a 2.2% drop in new-home sales, a seasonally adjusted rate of 307,000 units in December from 314,000 in November. Economists had expected an increase to 320,000. Builders were able to sell only about 302,000 for all of 2011. That's the worst level since the Census Bureau began compiling data in 1963.

Homebuilder shares tumbled on the report. Toll Bros. (TOL) slumped $1.16 to $22.07. Lennar (LEN) fell 67 cents to $22.13. The Philadelphia Housing Sector Index ($HGX) was off 2 points to 117.53. It's still up 14.2% this month.

In addition, jobless claims in the latest week rose to a seasonally adjusted 377,000 from 356,000, but the longer-term trend of lower claims levels remains intact.

What's not clear -- but may become clear in the next few days -- is if today's pullback is a pause in the rally or the start of something else. There have been concerns in the last few days that stocks have become overbought. The S&P 500's relative strength index is at 84. Readings above 75 suggest an index or a security is overbought.

Ford Motor (F) and Dow components Chevron (CVX) and Procter & Gamble (PG) will report before Friday's open. Also reporting: American Electric Power (AEP) and T. Rowe Price (TROW).

The government will report on gross domestic product in the fourth quarter. The University of Michigan will release its second consumer sentiment index report for January.

Futures trading suggests stocks will open lower on Friday. One reason may be European concerns -- yet again. The dollar was higher in electronic trading.
Energy prices -- New York close



Thurs.

Wed.

Month chg.

YTD chg.
Crude oil (-CL)

$99.70

$99.40

0.88%

0.88%
(per barrel)











Heating oil (-HO)

$3.0446

$3.0104

4.47%

4.47%
(per gallon)











Natural gas (-NG)

$2.6540

$2.7690

-11.21%

-11.21%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.8508

$2.8374

7.28%

7.28%
(per gallon)











Brent crude 

$110.79

$109.81

3.18%

3.18%
(per barrel)











Retail gasoline

$3.3790

$3.3790

3.36%

3.36%
(per gallon; AAA)












Starbucks earnings don't impress
Starbucks said it earned  $382.1 million, or 50 cents a share, on a 16.4% gain in revenue to $3.4 billion. The company earned $346.6 million, or 45 cents a share, on revenue of $2.95 billion in the year ago quarter. Analysts had expected 49 cents in earnings and revenue of $3.29 billion.

After hours, shares were down 84 cents, or 1.7%, to $47.50, after rising 57 cents to $48.34 in regular trading.

The gains were fueled by increasing sales in its stores, especially in China, and a 72% gain in sales in Starbucks- and Tazo-branded K-cup sales for Keurig coffee makers marketed by Green Mountain Coffee Roasters (GMCR).

But gross profit margins were squeezed by higher commodity costs and higher compensation and distribution costs in China and Europe.

The company boosted full-year fiscal 2012 guidance to $1.78 to $1.82 a share, up 17% to 20% from a year ago's $1.52.

Green Mountain shares were initially higher after hours because of Starbucks, but shares were off 17 cents, or 0.3%, to $49.17. In regular trading, the shares had fallen $1.71 to $49.34. The shares had peaked at $115.98 on Sept. 28. They have slumped since then on worries about the business model.

Apple and SanDisk weigh on the Nasdaq; Netflix soars
Apple and chip maker SanDisk (SNDK) were among the big reasons why the Nasdaq fell back.

Apple was down $2.03 to $444.63 as the market reacted to a report in The New York Times about poor working conditions at factories in China where iPads and iPhones are assembled. More than half of the suppliers audited by Apple have violated at least one aspect of Apple's code of conduct every year since 2007, according to Apple’s reports. Apple subcontracts out nearly all of its manufacturing.

Flash-memory maker SanDisk dropped $5.95 to $46.39 after offering late Wednesday a sales forecast that fell short of estimates, citing lower prices for chips that store data in mobile phones.

Netflix surged $20.97 to $116.01. That was the best performance of any stock in the S&P 500 and the Nasdaq-100 today. The online and mail-order video-rental service reported fourth-quarter profit that exceeded analysts’ estimates and forecast improving margins in its streaming business.

Caterpillar, JC Penney cheer investors
Caterpillar jumped $$2.26 to $111.31. The percentage change was tops among the 30 Dow stocks. Producers of coal, copper and iron ore are increasing investment to meet rising demand from emerging economies. Capital spending at major mining companies is expected to climb 25%, Bloomberg News said.

J.C. Penney (JCP) climbed the most in more than seven months after saying cost reductions from new CEO Ron Johnson’s turnaround plan may boost 2012 profit more than analysts estimated. Shares were up $6.44 to $40.72. Penney shares rose 8.8% in 2011. The department-store chain said it may save $900 million in the next two years as it simplifies its pricing strategy and revamps management. The company's profit forecast exceeded analysts’ estimates after changes Johnson announced yesterday failed to impress investors.

Telecommunications giant AT&T (T) fell 76 cents to $29.45. The largest U.S. phone company predicted 2012 earnings that trailed analysts’ estimates as record demand for smartphones such as the iPhone drive up subsidy costs.

E*Trade Financial (ETFC) tumbled $1.37 to $7.99. The online brokerage reported fourth-quarter revenue was $475 million. Analysts had expected $489.1 million.

Time Warner Cable (TWC) added $5.40 to $74.51 after saying it would repurchase $4 billion in shares. The company is rebranding itself as a broadband provider, rather than a cable TV business, to attract Internet users and make up for losses of video subscribers.

3M (MMM) added $1.10 to $87.58. The maker of Post-It Notes and fuel system tune-up kits posted higher profit than analysts estimated amid increasing demand for aerospace and auto industry products.

Dollar's decline boosts oil, gold
Thanks to the Federal Reserve's rate decision on Wednesday, the euro was rising against the dollar today and helping to boost commodity prices. The euro was at $1.311, up from Wednesday's $1.3104. The euro had fallen below $1.264 on Jan. 13.

Crude oil pushed to as high as $101.39 a barrel before dropping back to a settlement price of $99.70, up 30 cents. Brent crude, the benchmark North Sea oil, was up $1.21 to $111.02 a barrel. Natural gas (-NG) fell to as low as $2.588 per million British thermal units but rebounded back to $2.654, down 11.5 cents.

Gold settled up $26.60 to $1,726.70 an ounce. Silver (-SI) added 62.2 cents to $33.74 an ounce. Copper (-HG) rose 7.2 cents to $3.90 a pound.

Interest rates were lower, with the 10-year Treasury yield falling to 1.928% from 2.007% on Wednesday.

Energy, financial stocks are the weak links
The slump for natural gas pushed shares of natural gas producers lower. Devon Energy (DVN) dropped $1.35 to $64.82. Anadarko Petroleum (APC) was off $1.77 to $79.31. The NYSE Arca Natural Gas Index ($XNG) was down about 16 points to 636.

Bank stocks were broadly lower as interest rates fell.

Zions Bancorp (ZION), down 94 cents to $16.58, was the laggard among stocks in the KBW Bank Index ($BKX). First Niagara (FNFG) and Citigroup (C) were the only components of the index in the black. First Niagara rose 25 cents to $9.68. Citigroup added 42 cents to $30.38.

Bank of America (BAC) will freeze base salary levels and limit cash bonuses to $150,000 for some investment bankers, Bloomberg News reported today. The cap is part of a larger goal for the bank to preserve capital. Shares fell 5 cents to $7.30.

The cap on cash payments applies to those getting as much as $1 million in total year-end bonuses, with the rest coming in shares, Bloomberg said. Employees are being told of their payments today and can sell some of the stock starting on Feb. 15, Bloomberg said.

Short hits from the markets -- New York close



Thurs.

Wed.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0500%  0.040%

400.00%  400.00%
5-year Treasury note 

0.770%  0.804%

-7.23%  -7.23%
10-year Treasury note

1.931%  2.007%

3.21%  3.21%
30-year Treasury bond

3.090%  3.149%

6.96%  6.96%
Currencies











U.S. Dollar Index

79.513  79.717  -1.25%  -1.25%
British pound

1.5691  1.5662  0.99%  0.99%
(in U.S. $)

          
U.S. $ in pounds

£0.637  £0.639  -0.98%  -0.98%
Euro in dollars

$1.31  $1.31  1.15%  1.15%
(in U.S. $)

          
U.S. $ in euros

€ 0.763  € 0.763  -1.14%  -1.14%
U.S. $ in yen 

77.64  77.69  0.70%   0.70%
U.S. $ in Chinese

6.36  6.32  0.52%  0.52%
yuan

            
Canada dollar

$0.000  $1.004  -100.00%  -100.00%
(in U.S. $)

          
U.S. dollar 

$1.002  $1.004  -1.77%  -1.77%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,726.70

$1,700.10

10.21%

10.21%
(per troy ounce)











Copper (-HG)

$3.902

$3.830

13.55%

13.55%
(per pound)











Silver (-SI)

$33.7430

$33.1210

20.88%

20.88%
(per troy ounce)











Wheat (-ZW)

$6.5350

$6.4125

0.11%

0.11%
(per bushel)











Corn (-ZC)

$6.3450

$6.345

-1.86%

-1.86%
(per bushel)











Cotton 

$0.9604

0.9736

4.76%

4.76%
(per pound)











Coffee

$2.2255

2.2015

-4.76%

-4.76%
(per pound)











Crude oil (-CL)

$99.70

$99.40

0.88%

0.88%
(per barrel)










 

99Comments
Jan 26, 2012 3:28PM
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I need some insiders info....does anyone have a phone# of a politician in Washington who can supply me with that info so I can make lots of money.  My luck I would go to jail...but the politicians are never even questioned.
Jan 26, 2012 3:49PM
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THE RALLY WAS CUT SHORT BY PROFIT TAKING??? I'M SHOCKED!!!
Jan 26, 2012 3:20PM
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Day traders...short term greed is what influences this market rally period. They could careless

 

about the rest of the population that has money in it for retirement for the long-term.  Greed at its best .

avatar
Ever bid on an item on E-Bay and had some computer program ace you out at the last millisecond?

Think of super computers and far more expensive and efficient programs that hypersend thousands of trades in an instant that are forced through, at speeds no average investor could do, to capture many tiny amounts of day profits against any calculations that the average American private stock traders' could have possibly considered...........................yes​, that kind of odds against seeing a profit!

Jan 26, 2012 4:50PM
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Home prices falling, sales worst on record, jobless claims bumping up...record number of people on welfare....is this what Obama meant that our economy is doing better?  Duh.....This president is clueless!!!!!!!!!!!!​!!!!!!!!!!!!!!

Jan 26, 2012 6:13PM
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I see a lot of people are confusing the government with Wall Street.  Wall Street has purchased our government - mostly the Republicans because they love the system and are in agreement with Wall Streets values - but they own both parties - yes even the tea party Republicans - the system has been set up so that candidates can't get elected without Wall Street.

 Wall Street is never satisfied, they want your Medicare dollars, Social Security dollars, your 401K until there is nothing left - it is all consuming. 

They are counting on the stupidity of Americans to keep choosing R's of D's to bicker against each other and name call while they steal the rug out from underneath you but until we wake up - if we ever do - we will be responsible for our own demise.
Jan 26, 2012 3:49PM
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Stocks drop on speculation that tomorrow is Friday somewhere in the world and anticipation that Monday will follow this coming weekend.  Sarcastic 

 Invest in lead - it is rumored that, starting next week, the Chinese will be increasing their output of all exported products.

Jan 26, 2012 3:57PM
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Profit taking in WASHINGTON!!! It has to stop!! They are just Americans and have NO right to do this!!
Jan 26, 2012 3:38PM
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The future economic activity will naturally be driven and limited by energy cost. Affordable energy is and has been key to the financial health of the middle and even lower class of Americans. Until homes and work and market are within walking distance, oil will have an increasing pressure on our purchasing decisions. The question that begs an answer is, will we not be able to afford Chinese goods before they lose competitiveness due to shipping cost and our emerging hunger driven low cost future labor? The point where these cost meet is our future wage. This is the ultimate cost of participating in a global economy.
Jan 26, 2012 4:21PM
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Profit taking by our government in Washington!!! Why should that be legal??? Time for it to STOP!!!! Let Washington know, we are NOT going to put up with it!!!
Jan 26, 2012 4:45PM
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CNBC is that you think we are stupid or are you so blindly in Love with Obama ... could be that Valentine's Day is fast approaching so you giving a big OXOXOXO to the Marxist in the White House. Jesus !!!

 

First of all the Economic Slide started in 2007 when Harry Reid / Nancy Pelosi / Barack Obama controled Congress both the House and the Senate ... The DOW was 14,800 and unemployment was 4.8% as far as I am concern Obama Pelosi Reid own all of this mess and we are 2,000 underwater and closed to 10,000,000 unemployed.

 

Since Obama Pelosi Reid have been in charge unemeployment has gone though the roof and stocks have cratered. Don't tell me some BS about  " LAME DUCK " Bush because there was nothing he could do. Pelosi and Reid were laying the seeds of distruction for Obama to be sweep into the White House.

 

Truth is unemployment has not gone down Obama just removes and refuses to count over a million people because they're " Lazy - Soft - No Drive " Companies in the DOW and the S&P have been buying back their stock about 20% in your last article, so if you adjust the values to reflect the buy back the DOW is about 10,000

 

As the only trust worth CNBC anchor " Mark Haines " would put it that's a DEAD CAT BOUNCE. Shame on you Lairs, Shame. 

Jan 26, 2012 3:46PM
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What's new?  Everything will just tank again
Jan 26, 2012 5:36PM
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The Dow was at what, 14,800 in spring 2008.?  We've got a long way to go yet.
Jan 26, 2012 5:35PM
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So glad they are pushing and pumping up the economy just so we can have a great DOW average!  Never mind the dollar will tank and we'll see $5.00+ at the pumps this summer.  Just so this failing system "looks good"!  Way to go gubment!
Jan 26, 2012 4:26PM
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What could be better than to know the shysters recycle the shysters..lolSmileDon't tell anyone

Well since the middle class is disappearing...there​ will be two classes, poor and rich.

What then?????  The people that play with livelihoods of millions eventually will know the rules of double standards apply. 

 

Just wait until food is not just sustenance, but the commodity.  In the words of Harry Stamper

quote from Armageddon, " They got people just thinking this **** up, and then people backing those people thinking **** up". This is the best the government can do!

When you can't rob peter to pay paul...lie. 

Jan 26, 2012 4:34PM
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Obama and his tax cheat Gietnar have done a great job in artificially boosting the market by pumping out Federal Dollars and then buying it back.  I feel bad for the Republican President who tries to halt this semi-legal pawnsy scheme.
Jan 26, 2012 6:16PM
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Like we said earlier this morning, after the call to sell came right after 1100 hrs and these manipulators started doing their thing, that's all she wrote. Actually not a really bad day, Dow basically flat, S&P hurt a bit...Oh well, cant complain too much, we've been having some decent weeks, have to throw these scumbags a bone every once in a while, the problem is that they are never satisfied with just one. Watch out tomorrow.
Jan 26, 2012 5:04PM
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I don't like any of the Repub candidates, but I do envision Newt Gingrich taking on Barack Obama. Oh, to be a fly on the wall there!
Jan 26, 2012 7:29PM
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The market's January rally has pushed the major indexes to levels not seen since mid-2008. The reason for the gains -- at least until today -- were signals the economy was strengthening and could see a decent year in 2012.
Signals from November and December's indicators, which is like looking in a  rear view mirror, is not to a great reason too get excited about the economy in '12 "decent year". That's old news by now. The fact that the Fed is going to leave rates low until 2015 is enough to make the market rally.....if the economy is really acclerating why would they commit to this? Because it isn't, it's actually slowing and they are concerned, we should be too.
Jan 26, 2012 5:36PM
avatar

I'm a software developer for a large (our name appears on an NBA arena) insurance company

 

 

I can see Brian now...coding software to 'insure' his insurance company properly...that's 'properly' to you, fleecing their clients.

 

Likely his software does one thing...Claim Form...and only one radio button...DENY!Smile

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