Disney, oil, China lead stocks lower
Crude falls nearly to $98, and the Dow drops 130 points, with Caterpillar, Chevron, Exxon and Disney the weak links. China is hit by higher inflation and lower growth. Investors love Macy's earnings but boo Cisco's results.
Updated: 6:43 p.m. ET
It would be easy to blame Walt Disney (DIS) for the stock market's problems today. Though the shares were off 5.4% to $41.52, you can't.
Crude oil (-CL) dropped under $100 a barrel, and energy stocks were the weakest sector of the market. Gold (-GC), silver (-SI) and copper (-HG) prices were lower. So, materials stocks, dominated by metals, were one of the weakest sectors.
And reports from China showed more inflation and a softer economy than anyone expected. So the dollar is higher, and Caterpillar (CAT), which acts a proxy for big U.S. exporters, closed down 2.6% to $109.98.
Put it all together, and the Dow Jones industrials ($INDU) closed down 130 points, or 1%, to 12,630. That was the biggest loss for the blue chips in a week but an improvement from about 2:30 p.m. ET when the index was off as many as 183 points. The Standard & Poor's 500 Index ($INX) was down 15 points, or 1.1% to 1,342, and the Nasdaq Composite Index ($COMPX) had fallen 27 points, or 0.9%, to 2,845.
Adding to today's stress were two more factors: a larger-than-expected U.S. trade deficit in April and hedge fund manager Raj Rajaratnam's conviction today on 14 counts of insider trading and securities fraud.
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Still, Disney; Exxon Mobil (XOM), off 2.1% to $81.12; Chevron (CVX), down 2% to $102.26; and Caterpillar by themselves subtracted roughly 77 points from the Dow.
Disney's pummeling was directly related to the company's fiscal-second-quarter results late Tuesday, which fell short of analysts' second-quarter expectations. The company was hurt by weakness in its movie business and temporary shutdown of its theme park in Japan. The stock was the weakest among the 30 Dow stocks and fourth-weakest among S&P 500 stocks.
After the close, networking giant Cisco Systems (CSCO) reported 42 cents a share in fiscal-third-quarter earnings, unchanged from a year ago; analysts had expected 37 cents. Revenue grew 5% to $10.9 billion.
Shares, up initially on the results, fell back during the company's conference call with analysts and were off 3% to $17.24. The issue was reduced guidance for the fiscal fourth quarter.
The shares had finished off slightly to $17.78 in regular trading and are down more than 12% this year.
High margin requirements hit oil
Crude oil settled down $5.67, or 5.5%, to $98.21 a barrel. Much of the decline is related to the CME Group decision to raise margin requirements on futures contracts on crude effective after Tuesday's trading. The move is meant to dampen speculation. Margin increases on silver precipitated its 27.4% slump last week.
Also pushing crude lower was a government report showing larger-than-expected domestic oil and gasoline supplies. Wholesale gasoline futures, in fact, fell 25.69 cents, or 7.6%, to $3.1228 at the New York settlement.
The gasoline drop shows that high gasoline prices are dampening U.S. gasoline demand. Brent crude, the benchmark North Sea oil, was off $4.40 to $113.23 a barrel.
Silver settled down $2.971, or 7.7%, to $35.515 an ounce and was continuing to fall after hours. Gold settled down $15.50, or 1%, to $1,501.40 an ounce but rose to $1,505.50 after hours.
The iShares Silver Trust (SLV) exchange-traded fund, a way for hot money to get into silver, was down 8.3% to $34.39. The ETF is down more than 25% this month alone. The SPDR Gold Shares (GLD) ETF was down 0.9% to $146.54.
As metal prices dropped, Freeport-McMoRan Copper & Gold (FCX) was off 5.6% to $48.27. Coeur d'Alene Mines (CDE), one of the largest silver producers, was down 3.7% to $25.71. U.S. Steel (X) fell 2.3% to $45.67.
Airline stocks, however, benefited from crude's decline. American Airlines parent AMR (AMR), Delta Air Lines (DAL) and JetBlue Airways (JBLU) were each up more than 2% and were the leaders in the Dow Jones Transportation Average ($DJT). The index was off 1.3% to 5,457, however.
|Energy prices -- New York close|
|Wed.||Tues.||Month chg.||YTD chg.|
|Crude oil (-CL)||$98.21||$103.88||-13.80%||7.47%|
|Heating oil (-HO)||$2.8983||$3.0012||-11.52%||13.94%|
|Natural gas (-NG)||$4.1810||$4.2460||-11.00%||-5.09%|
|(per mil. BTU)|
|Unleaded gasoline (-RB)||$4.1810||$4.2460||-11.52%||13.94%|
|(per gallon; AAA)|
Trade gap widens; China stresses build
The U.S. trade deficit widened to $48.2 billion in March, from February's deficit of $45.4 billion, the Commerce Department said. Economists had expected the deficit to widen to $47.7 billion in March.
In addition, the Energy Information Administration said crude oil inventories rose by 3.8 million in the week ended April 6, exceeding the build of 1.6 million barrels that analysts had been expecting.
China’s consumer prices rose 5.3% in April from a year earlier, exceeding the government’s full-year target of 4%, Bloomberg News said. The gain was also more than the 5.2% median forecast. Producer prices increased 6.8%, the statistics bureau said today in Beijing. Retail sales expanded 17.1%, below economists’ median 17.6% estimate.
Macy's shares soar on earnings
Macy’s (M), the second-largest U.S. department-store chain, jumped the most in a year after boosting its 2011 profit forecast and doubling its dividend, bolstered by surging online sales.
Profit will advance to as much as $2.45 a share this year, the company said. Analysts had projected $2.35 a share.
Macy’s said sales in the first quarter exceeded its expectations as online revenue jumped 38% and spring fashions sold strongly. Consumers have ramped up spending as the job market has improved.
Shares closed 7.7% to $28.36, tops among S&P 500 companies.
Macy's was followed by American International Group (AIG), up 3.5% to $30.65. AIG had been up as much as 7.3%. The bailed-out insurer and the U.S. Treasury will offer 300 million shares of common stock in AIG as the company seeks to replace government investment with private capital. That is, however, a lower number than originally expected.
Intel leads the Dow
Intel (INTC) was the leader of the 30 Dow stocks, up 1.7% to $23.41.The chipmaker raised its dividend from 16 cents to 21 cents a share. It was the second dividend boost in six months as increasing corporate spending on technology boosts its earnings.
But only four Dow stocks were actually showing gains.
Microsoft (MSFT) was off 1.2% to $25.36 as skepticism about its acquisition of Skype grew. (Microsoft publishes MSN Money.)
While Macy's led the S&P 500, Yahoo (YHOO), down 7.3% to $17.20, and Disney were the S&P laggards.
Teva Pharmaceuticals (TEVA) was the leader among Nasdaq-100 ($NDX.X) stocks, up 3.2% to $48.65. Yahoo and construction-equipment makerJoy Global (JOYG) were the laggards. Joy Global was down 4.1% to $89.03.
The index, which tracks the largest Nasdaq stocks, was off 18 points, or 0.8%, to 2,393.
|Short hits from the markets -- New York close|
|Wed.||Tues.||Month chg.||YTD chg.|
|13-week Treasury bill||0.020%||0.030%||-50.00%||-83.33%|
|5-year Treasury note||1.849%||1.894%||-6.38%||-8.28%|
|10-year Treasury note||3.157%||3.195%||-4.22%||-4.48%|
|30-year Treasury bond||4.296%||4.334%||-2.50%||-1.51%|
|U.S. Dollar Index||75.517||74.782||3.30%||-4.76%|
|(in U.S. $)|
|U.S. $ in pounds||£0.611||£0.611||2.02%||-4.63%|
|Euro in dollars||$1.421||$1.420||-4.08%||6.21%|
|(in U.S. $)|
|U.S. $ in euros||€ 0.704||€ 0.704||4.25%||-5.85%|
|U.S. $ in yen||81.235||81.301||-0.24%||-0.16%|
|U.S. $ in Chinese||6.514||6.514||0.03%||-1.52%|
|(in U.S. $)|
|(in Canadian $)|
|(per troy ounce)|
|(per troy ounce)|
|Crude oil (-CL)||$98.21||$103.88||-13.80%||7.47%|
Considering the huge impact oil has on the economy, if logic prevailed, cheaper oil should trigger a positive day on Wall Street, as cost of good would go down, profit would go up and consumers would have more disposable income to spend
Apparently, logic does not prevail. Greed and speculation do.
And it makes no sense to me either that the market drops when oil prices go down. And the price at the pump goes up immediately when the oil prices go up, but they don't go down immediately when oil prices drop. Explain than one!
Widespread speculation in global markets, fueled by the turmoil in some oil producing countries drove the price of crude up to near record levels. Increased oil exports from Libya, and relative stability in oil producing nations, have been driving the price of crude down and with that the value of oil company stocks. Similarly, lower than expected growth in China has strengthened the value of the dollar and the price of gold, silver and other previous metals are going down.
I don't feel sorry for Wall Street and I definitely don't feel sorry for the oil companies. The latter raised prices at the pump the moment the price of crude began to rise; but now that the price of crude has been going down prices at the pump have barely declined. One of the first orders of business for Congress and the Administration is to stop subsidies to oil companies and eliminate all tax breaks. The same goes for pharmaceuticals and the agri-business. These sectors are posting huge profits, their pricing strategy does not include lower prices to consumers and, consequently, they don't deserve a dime more than what we pay when we purchase their products.
Why is the price of a barrel of oil this cheap, and fuel price is through the roof? It is time to stop the speculating by the Stock Brokers running fuel through the roof and go back to a way of life that people can afford instead of making a few people rich!
Although there may not be an overnight cure for the weak economy, it should start right here in the USA. As voters, we need to challenge our legislators to award tax concessions for those companies moving their overseas factories back to the USA and hiring US citizens. Although the logic of it is simple, the companies and their top executives produce cheaply overseas and sell at high prices. Our country grew strong from the end of the Civil War through the 1970's because the manufacturing was in the USA. American made goods were coveted everywhere because of the high quality. It is time for a period of US national pride.
I'm still postponing the family drive vacation. I hope they enjoy the community pool we all can bike to. Perhaps we'll lose a few pounds.
Wasn't oil a highly regulated commodity in the 70's and early 80's? Meaning only certain entities, companies and end users could bid/ or trade on a contract?
Hmmm... high oil prices...
If you don't like the price of something, don't buy it... It canbe the house down the road, the car on the dealers lot, or the cost of that steak at the grocery store...
Gasoline is about 3.34 a gallon without tax... Maybe you should ask why they need a buck plus in tax on each gallon? Why don't they elimintae the tax... Or has gasoline become like cigerettes...Something the government makes more off of than the oil company...
Just think about the government's haul of a $1 plus a gallon. Far more than the oil companies profit...
And now Congress wants to remove 2 billion in tax incentives... That will increase the price a cent or too also... But that should be done... Hopefully we will stop subsidizing all business... Green, banks, Obama's GE, etc...
Oil companies just are like all companies, the pass all costs unto the customers...
We don't want to drill here, but we have taxpayer money to help Brazil drill for oil? There is the FIRST subsidy to get rid of...
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[BRIEFING.COM] S&P futures vs fair value: +3.40. Nasdaq futures vs fair value: +7.20. The S&P 500 futures trade three points above fair value.
Markets in Asia ended on a mostly higher note. The Reserve Bank of New Zealand hiked its key rate 25 basis points to 3.50%, as expected.
- In economic data:
- China's HSBC Manufacturing PMI jumped to 52.0 from 50.7 (consensus 51.0)
- Japan's trade deficit narrowed to JPY822 billion from JPY909 billion ... More
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