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.

By Charley Blaine May 11, 2011 12:41PM

Charley BlaineUpdated: 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.

Article continues below.

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.iShares Silver Trust 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%
(per barrel)

 

 

 

 
Heating oil (-HO)

$2.8983  $3.0012  -11.52%  13.94%
(per gallon)

 

 

 

 
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)

 

 

 

 
Brent crude 

$112.57  $117.63  -10.58%  18.81%
(per barrel)











Retail gasoline

$3.9620

$3.9510

1.36%

28.97%
(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. Macy's

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.
Treasury yields




 





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%
Currencies











U.S. Dollar Index

75.517

74.782

3.30%

-4.76%
British pound

$1.6364

$1.6364

-1.98%

4.86%
(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%
yuan











Canada dollar

$1.042

$1.042

-1.28%

3.82%
(in U.S. $)











U.S. dollar 

$0.961

$0.961

1.30%

-3.68%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,501.40

$1,516.90

-3.53%

5.63%
(per troy ounce)

 

 





Copper (-HG)

$3.914

$4.042

-6.35%

-12.00%
(per pound)











Silver (-SI)

$35.515

$38.486

-26.92%

14.80%
(per troy ounce)











Wheat (-ZW)

$7.7150

$7.9875

-3.71%

-2.86%
(per bushel)











Corn (-ZC)

$6.7725

$7.0725

-10.18%

8.80%
(per bushel)











Cotton 

$1.5030  $1.5140  -4.89%  3.79%
(per pound)











Coffee 

$2.73  $2.83  -8.90%  0.1357588
(per pound)











Crude oil (-CL)

$98.21

$103.88

-13.80%

7.47%
(per barrel)











155Comments
May 11, 2011 1:37PM
avatar
Interesting that oil keeps dropping and today is back below $100 a barrell.  However today in WI, a gallon of gas went up to $4.10.  Yes there is something totally wrong with the system and yet no one does anything about it.  I agree this is manipulation of the markets and our wallets.  Soon we will be back in a recession because no one will have any money to money anything except gas and pay taxes !!
May 11, 2011 1:14PM
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You have to be kidding me again - oil falls, market down;   wait a minute, oil rises market down; give me a break.  Can you say MANIPULATION?
May 11, 2011 1:54PM
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WOW last week oil was down i believe almost 17% the price of gas stayed the same here in missouri $3.75.... Yesterday the price of oil was up like $1.50 a barrel and the price of gas in our city went up to $3.86. Can anyone please explain to me how that is possible i have no degree in business so i must be missing something, so please kindly explain to me how it works Light bulb
May 11, 2011 2:11PM
avatar

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.

May 11, 2011 1:35PM
avatar
This is funny. So China is having lower growth now, and oil is down.. Could it be because we (the working poor) can't even afford to drive to Walmart and buy your made in china crap anymore?  I think so, especially when I hear "dollar stores" are going to start springing up across the country. I think I'm going to start investing my money in generic mac & cheese and burgler alarm companys. Seems it would be a safe bet for loooong term investment.Party
May 11, 2011 2:10PM
avatar
Cheaper oil?  I know it's a bit apples and oranges but gasoline went up 12 cents a gallon today in my city.  We won't see a decrease for weeks because we're told the price of oil and price of gasoline are not related.  Yet when oil goes up a penney, we see that increase immediately at the pump.  So maybe the more correct statement is that falling oil prices are not directly related to falling gasoline prices.
May 11, 2011 2:12PM
avatar
The oil companies who boast billions, yes billions, in profits get tax breaks.  So if they collect taxes from these guys instead of us, eliminate the fuel tax for consumers, my guess is the government will make more off the taxes from the billions in profits, and even if the gas prices increase as a result, then the elimination of the fuel tax should help to offset that increase. 

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!

May 11, 2011 2:34PM
avatar

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.  

May 11, 2011 1:24PM
avatar
When is the price for gasoline goind down? every rich guy makes a profit with the oil going up and down but what about the average guy that works 40 hours to support a family!
May 11, 2011 2:30PM
avatar
Okay.... so let me understand this. A few weeks ago stocks fell on the news of increased oil prices, and now the stocks fell because of the slump in oil prices. I'm not sure I understand.........
May 11, 2011 2:25PM
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Oil falls, but here in the wonderful land of Lincoln, the prices jumped again another 13 cents.  WTF!!!!  Now up to $4.49 down the street from where I work in a far west suburb of Chicago.  I guess the gas stations never got the memo.
May 11, 2011 2:26PM
avatar

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!

 

May 11, 2011 2:28PM
avatar
Perhaps   raising margin requirements on future oil contracts will result in curbing some of the speculation and stabilize pricing. One can only hope this will be the case.I don't know
May 11, 2011 1:55PM
avatar
Bunch of complainers!! We as consumers have the power but we prefer to surround ourselves in all these wonderful Chinese made products. What...you want the government to step in and charge high tariffs jacking up the price of everything from jeans to LCDs? We are the product of our choices. Buy electric cars, buy US made only. refuse to buy crap you don't need. How many shoes, TVs, etc., does someone really need? I just bought a Lexus LS460 and I'm trading it in for a Tesla Model S as soon as it's available. It's my finger to the oil companies. I never buy stuff unless I truly need it and I buy from local stores. I don't want to contribute to the enslavement of children and the destruction of other countries by our multinational corporations just so I can be marketed to buy crap I don't need. And don't give me that crap that our corporations create jobs abroad. BS! Go ask the locals yourself. Those people are better off as farmers. At least then they have a say in what happens in their lives not a board of directors 8000 miles away.
May 11, 2011 3:03PM
avatar
See, all they had to do was raise the margin requirements for the speculators, or should I say manipulators, where they have to put more skin in the game and the price of oil goes down.  This should have been done long ago, just like with the derivatives market.  We would have never had a big run up in oil.  Funny how this comes about right after the Feds start looking into the oil market to see if there is any manipulation. 
May 11, 2011 3:36PM
avatar

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.

avatar
Possibly another reason for the stock drop was the conviction of one of the dogs of wallstreet for insider trading and possible 19+ year jail time.......................some time to clean out their collective drawers!
May 11, 2011 1:54PM
avatar

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?

May 11, 2011 3:10PM
avatar

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...Somethi​ng 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...

May 11, 2011 2:57PM
avatar
I've been saying this for a while now, sooner or later china is going to get tired of us, pull the plug, and cash in their chips. The only reason they've put up with us for this long is because we have continued to buy their junk and they buy our treasuries @ a discount. Bernanke will have to raise interest rates sooner than later. It's unavoidable. When that happens you can kiss what's left of the housing market goodbye forever. And maybe it's for the best. in fact I think it should have happened 2 years ago. Printing money and wishful thinking that consumers will keep spending was stupid. The vast majority are tapped out, unemployed/under employed, and the days of easy credit are GONE. The day of reckoning is here. bout damn time...
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