Stocks slide after flirting with 2008 levels

Updated: 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.

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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.

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.

• Check MSN Money's earnings calendar.
  

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)