Dow falls 142 points on Korean worries

A shootout in Korea shocks global markets, driving the dollar and gold higher. Oil drops. Existing-home sales fall in October. J. Crew will go private in a $3 billion deal.

By Charley Blaine Nov 23, 2010 2:50PM

Charley BlaineUpdated: 11:37 p.m. ET

U.S. stocks were pummeled today, with the Dow Jones industrials ($INDU) briefly falling below 11,000, in the wake of North Korea's apparent shelling of a South Korean island.

The American slump followed the reaction of markets around the world to the Korean news. Three more worries weighed on stocks: whether Europe could contain the Irish debt crisis, a weak report on existing-home sales and a cut in the Federal Reserve's economic outlook.

The dollar, gold and silver all rallied as some investors sought safe havens for their cash.

The Dow closed down 142 points, or 1.3%, to 11,036, after dropping as many as 186 points early in the session. The Standard & Poor's 500 Index ($INX) fell 17 points, or 1.4%, to 1,181, and the Nasdaq Composite Index ($COMPX) was off 37 points, or 1.5%, to 2,495.

Gold settled up $19.90 to $1,377.60 an ounce in New York. Silver settled up 11.1 cents to $27.572 an ounce. Copper, however, settled down 4.9 cents to $3.7025 a pound.

The U.S. Dollar Index, which measures the greenback against a basket of currencies, was up 1.3% to 79.81. The dollar rose against the euro, British pound and the Japanese yen. The biggest gain was 1.7% against the euro.

Crude oil was down 49 cents to $81.25. Crude had fallen to as low as $80.28. early in the day.

The dollar's gain also pushed interest rates lower, with the 10-year Treasury yield falling to 2.762% from 2.813% on Monday.

 

Futures trading suggests a slightly higher open on Wednesday. The day includes reports on initial jobless claims and personal income and spending. Deere (DE) and Tiffany (TIF) will report quarterly results.

Jury: SAP owes Oracle $1.3 billion

After hours, a federal jury in Oakland, Calif., ruled that German software maker SAP (SAP) should pay $1.3 billion to rival Oracle (ORCL) for copyright infringement. Oracle shares jumped 1.3% to $27.54 after hours after dropping 3.1% to $27.19 in regular trading.


SAP had admitted liability for the actions of a now-shuttered SAP subsidiary called TomorrowNow.


TomorrowNow, which provided software maintenance and support to Oracle customers, illegally downloaded Oracle software and documents, infringing on 120 copyrights. SAP had argued its liability was $40 million. Oracle wanted $288 million to $3 billion. SAP, whose shares fell 1.4% after hours to $48.02 in New York, may appeal.


Energy prices -- New York close
 

Tues.

Mon.

Month chg.

YTD chg.
Crude oil 

$81.29

$81.74

-0.22%

2.38%
(per barrel)











Heating oil

$2.2496

$2.2686

0.53%

6.33%
(per gallon)











Natural gas 

$4.2640

$4.2710

5.60%

-23.47%
(per mil. BTU)











Unleaded gasoline

$2.1342

$2.1519

3.63%

3.96%
(per gallon)











Retail gasoline

$2.8700

$2.8720

2.17%

8.75%
(per gallon; AAA)












Market has struggled in last three weeks
Today's was the eighth loss in 12 days for the Dow and S&P 500 and sixth in 12 sessions for the Nasdaq. That's left some traders worried that the market may have peaked for 2010.

The Dow finished the day down nearly 4% from its 2010 closing high of 11,444, reached on Nov. 5. It's still up 5.8% for the year. The S&P is off 3.7% from its high close on the year, 1,226, also set on Nov. 5.

The Nasdaq peaked on Nov. 6 at 2,580. With a slide of 3.3% since then, its 2010 gain has been trimmed from 13.5% to 10%.

Dollar's gain hits export-oriented stocks
The dollar's gain hit commodity stocks and stocks that have benefited from a falling dollar. The laggard among the 30 Dow stocks was IBM (IBM), with Caterpillar (CAT) and 3M (MMM) among the five worst performers. The other two were Exxon Mobil (XOM) and Chevron (CVX), both off because of the decline in energy prices.

The market's decline came despite a 16.8% rally to $43.99 in shares of retailer J. Crew (JCG). The company said an investor group led by CEO Leonard Green will buy it for $43.50 a share, or about $3 billion. This is the second time J. Crew has been taken private.

In addition, Hewlett-Packard (HPQ) shares were up 2.2% to $44.19 after delivering solid results for its fiscal fourth quarter and boosting guidance for fiscal 2011.

HP was the only Dow stock to show a gain today, along with just seven stocks in the Nasdaq-100 Index ($NDX.X), which tracks the largest Nasdaq stocks. The index was off 34 points, or 1.6%, to 2,495. Apple (AAPL), down 1.5% to $308.73, contributed 6.5 points to the decline.

Decliners were ahead of gainers 3.6-to-1 on the New York Stock Exchange and 2.9-to-1 on Nasdaq.

An additional worry, especially for hedge-fund managers, was where a federal insider-trading probe was headed. A number of large hedge funds and money management firms reported receiving requests for information. No charges have been filed, however.

The Fed cuts its outlook, disagrees on stimulus efforts
Federal Reserve officials approved a $600 billion plan to stimulate the economy, despite wide disagreement on whether the plan promoted by Chairman Ben Bernanke would work.

Nonetheless, all but one member of the Federal Open Market Committee, the Fed's rate-making body, voted to go ahead with the plan, according to minutes of the FOMC's Nov. 2-3 meeting.

The concerns over the plan, which involves buying Treasury securities to drive interest rates lower, included:

  • The bond purchases won't address the factors keeping unemployment high, including whether laid-off workers had the skills needed for today's economy and could even relocate.
  • The plan could drive the dollar down to unacceptable levels.
  • The plan could boost inflation pressures.
The FOMC also trimmed its economic outlook for 2011 and beyond. It sees the U.S. unemployment rate ranging between 8.9% to 9.1% in 2011. A June outlook suggested the range would be 8.3% to 8.7%.

Existing-home sales fell; consumers help the economy
Stocks weren't helped by a weak report on existing-home sales. The National Association of Realtors said sales fell 2.2% in October from September to an annualized 4.43-million-unit rate from 4.53 million in September.

Sales were off 25.9% from October 2009's 5.98-million-unit rate, when sales were surging prior to the initial deadline for the first-time homebuyer tax credit.

Year-to-date, there have been 4.15 million existing-home sales, down 2.9% from 4.272 million units at this time in 2009, the Realtors said.

The U.S. economy grew more than previously calculated in the third quarter, led by stronger consumer spending and fueled by labor income gains that may stoke demand into 2011.

The revised 2.5% increase in gross domestic product compares with a 2% estimate issued last month and a 1.7% rise in the second quarter, the Commerce Department said today. Consumer purchases rose at the fastest pace since the last three months of 2006.

Is there a reason for the Korean shootout?
If you assume North Korea started the shooting that killed two people on South Korea's Yeonpyeong Island, the question is why?

A short answer from Mike Chinoy, a former CNN correspondent in Asia, is that the North Koreans want the rest of the world to know they can make bad stuff happen and there's a risk to ignoring them or trying to punish them.

South Korean President Lee Myung-bak  has been pursuing a get-tough policy, which the North Koreans resent, and clashes have erupted with some regularity in the last few years, says Chinoy, now a senior fellow at the U.S. China Institute at the University of Southern California.

What the North Koreans really want is to talk to the United States on a regular basis.

Some analysts linked it to the need for food aid, which has been largely denied by South Korea and strangled by international and U.S. sanctions, The New York Times said. Adding to the North’s internal political realities, the ailing leader, Kim Jong-il, has been positioning his youngest son as his successor.

The incident came after an American nuclear scientist who visited North Korea earlier this month said he had been shown a vast new facility built secretly and rapidly to enrich uranium.

The shooting began just as South Korea's stock market was closing. The Seoul Composite Index fell 0.8%. Markets in China, Hong Kong, Singapore, Indonesia and India all fell at least 1.3%. The biggest loss was 2.7%, suffered bv Hong Kong's Hang Seng Index.

Short hits from the markets -- New York close
 
  Tues.

Mon.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill
0.14%

0.13%

16.67%

180.00%
5-year Treasury note 
1.39%

1.43%

17.56%

-48.40%
10-year Treasury note
2.57%

2.81%

-1.45%

-33.02%
30-year Treasury bond
3.92%

4.21%

-2.10%

-15.62%
Currencies











U.S. Dollar Index

79.762

78.768

2.98%

1.97%
British pound

$1.5785

$1.5964

-1.67%

-2.42%
(in U.S. $)











U.S. $ in pounds

£0.63

£0.63

1.70%

2.47%
Euro in dollars

$1.34

$1.36

-4.21%

-6.69%
(in U.S. $)











U.S. $ in euros

€ 0.75

€ 0.73

4.40%

7.17%
U.S. $ in yen 

83.33

83.26

3.00%

-10.39%
U.S. $ in Chinese

6.67

6.64

-0.36%

-2.28%
yuan











Canada dollar

$0.98

$0.98

-0.53%

2.80%
(in U.S. $)











U.S. dollar 

$1.02

$1.02

0.53%

-2.72%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,377.60

$1,357.80

1.47%

25.67%
(per troy ounce)











Copper

$3.70

$3.75

-0.83%

10.64%
(per pound)











Silver

$27.57

$27.46

12.25%

63.68%
(per troy ounce)











Wheat 

$6.42

$6.46

-10.49%

18.56%
(per bushel)











Corn

$5.29

$5.15

-9.19%

27.50%
(per bushel)











Crude oil 

$81.25

$81.74

-0.22%

2.38%
(per barrel)











24Comments
Nov 23, 2010 5:46PM
avatar
The US should hold closed door meetings with China and trade the two Koreas for Mexico which we could turn into 16 states.  That would solve immigration issues, provide plenty of coastal property, give US a great cash crop of coffee and pot, provide more oil to waste away, eliminate the gang warfare and on and on.  We could bring home the 000s of troops in S. Korea.  Probably ought to give Afghanistan and Pakistan to India while we're fixing stuff. Now what to do with Israel?
Nov 23, 2010 3:53PM
avatar
Buy gold, build your golden fortresses, run for cover and hunker down for the bloody World War lll and class warfare coming to a town near you soon. I'm betting on the poor to win this war, how about you? Thinking
Nov 23, 2010 7:34PM
avatar

havasu46,

Israel should just take the middle east as far as they would like. Syria, Jordan, Iraq, Palestine and kill everyone in those areas like they were told, by God, to do when they came out of Egypt. (Genesis 15:18)

Nov 24, 2010 8:18PM
avatar
   The only way to beat N. Korea in 1953 was to use nukes and that options was gone soon after WWII.  An armistice was the best outcome possible at that time and neither China nor us want to go to war.  China controls Kim Song-Ill and will soon control Kim Song Un.  The bombing of S. Korea was just a lesson in how far the Russians will allow the N. Koreans to go.  It appears the answer is considerable.
Nov 24, 2010 5:40PM
avatar
wall street and the banks are'nt nothing but crooks and bums. stocks have been manipulated since 2009. stocks went down because n. korea attacks s. korea. they go up the very next day because applications for jobless benefits went down. what kind of sense does that make. wall street does'nt want the stock market to go to high because people will re-coup their losses and pull their money out. i know i am. its wall street, the banks, and that rat nest in D.C. against the working man.
Nov 24, 2010 10:19AM
avatar

Taking J Crew private is just the beginning. With so much cheap money available, 2011 will be a record year for taking companies private, as well as M&A activities.  It could be the engine which drives the market next year.

 

Buying up competitors or taking a company private is more profitable than hiring workers.

Nov 24, 2010 9:07AM
avatar
Hmmmm..... "Free" and "Fall" are going through my mind this morning. Wink
Nov 24, 2010 1:38AM
avatar

Nerd  just how obtuse can you be on this one? all market-moving "geopolitical concerns" have there basis rooted in potent end-games or missed opportunities.

 

the north koreans were attempting to cozy up to the free world and do us all a huge favor, but their artillery failed to reach its true target: wasilla.

 

Nov 24, 2010 12:23AM
avatar
Will someone, anyone PLEASE tell me why stocks go up and down on events that have no financial bearing on the markets, which I thought were motivated by loses and gains when trading and currency is involved. How the hell does North Korea's actions make the stocks go down? What does North Korea have to do with America's stock market? So if the North bombs the South the markets will lose a 1000 points? You mean shareholders are ransomed over a dam conflict which is not of our control?
Nov 23, 2010 11:04PM
avatar

Such crap that politics sway the market.  Markets are about money and about companies that make money and lose money.  It's not he shot his gun at me.  Nothing but a P I S S P O O R excuse to have a down day!!!!

Nov 23, 2010 8:52PM
avatar
"If you assume North Korea started the shooting"?  Really?  Facts are facts regardless of how many people question them; stick to financial matters instead of military speculation.
Nov 23, 2010 8:08PM
avatar
After a big decline in stocks , it's time to buy because they look more valuable . Opportunity emerges when many bad events take place at the same time . Buy buy buy  ! 
Nov 23, 2010 7:40PM
avatar
What did we do before there were counselors?  We went to Dr. Jim Beam and Dr. Jack Daniels.
Nov 23, 2010 7:30PM
avatar
Did the market drop?Ask the power hungry?Why?
Nov 23, 2010 7:05PM
avatar

Glad Im Not You:

 

If you call that ignorant buffoon a "free thinker" you need counseling also.

 

Mozart 66:

I think you meant to keep my fingers still since it was a written comment.  Like an idiot such as you can influence me.

Nov 23, 2010 5:55PM
avatar
I doubt that plowboy in Korea had anything to do with the market drop. Just something else to blame the obvious on. Maybe the fact that the housing market is still flat, that banks aren't lending, that real wages are receding and that unemployment benefits are drying up has a little more to do with it. I'm in the retail/wholesale business and can tell you from past experience that the drop in sales over the last 30 days especially in retail is quite unusual and steep. Get ready for a market hit the first of the year after a lousy Christmas season.
Nov 23, 2010 5:02PM
avatar
I agree with money Wise. The North/South Korea debacle has little to do with our 150 point market drop. If a squabble between North and South Korea equates to losing 1.5% of our United States market, then the market is even more fake than I thought it was. We need to remove the computers and get back to trading fundamentals based on P/E ratios and actual performance rather than pure speculations.
Nov 23, 2010 4:59PM
avatar
Island with a palm treeThis market might pull back down to 10750's on Dow, 2300's S&p. and not much more. This will make a good buying opportunity to accumulate one's equity position .MoneyAbout N and south Korea i don't believe either that this two countries will blow its other out of the face of the earth.
avatar

Hurry Benny, print some more money and buy some more bonds, damn the torpedoes!.......lord knows you can't allow the dow to drop below 11,000.

Nov 23, 2010 4:14PM
avatar

Oh, these two countries, North and South Korea, have been doing this since 1953. I don't expect much from this latest problem either. North Korea has a new leader and he has to show off for the population at home. If Mac Arthur was left alone, there would just be one Korea now. But he was not and you still have this same on going mess today.  Also, the stock market always finds a excuse to sell off, just like it finds an excuse to rally. SOS.

 

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