Dow falls 251 as economic worries deepen
Stocks fall broadly, and crude oil sinks below $80 as a widely watched manufacturing report disappoints. Existing-home sales dip. Bed Bath & Beyond and Celegene shares slump. Big banks are downgraded by Moody's.
Updated: 7:34 p.m. ETStocks tumbled in the second-worst loss of the year today as investors fretted about slowing growth around the world as well as weaker-than-expected reports on manufacturing in the Philadelphia region and existing-home sales.
Jobless claims declined less than expected. Crude oil (-CL) in New York fell below $80 a barrel for the first time since October, in part because of a report showing weakening manufacturing in China. Brent crude fell below $90 for the first time since the end of 2010. Energy stocks were the biggest drag on the market.
The market was also hurt by a Goldman Sachs recommendation today that investors short the entire Standard & Poor's 50O Index ($INX), believing the index is headed to 1,285, a 3% decline from its current level. Analysts believe economic weakness that became apparent in May is continuing in June. And bank stocks were lower in expectation that Moody's Investors Service was going to downgrade 15 global investment banks this afternoon or Friday.
Meanwhile, Bed Bath & Beyond (BBBY) shares slumped by $12.50 to $61.17 after the company trimmed fiscal-second-quarter guidance. And shares of biotechnology company Celgene (CELG) dropped $7.72 to $59.45 after European regulators asked for more data on its drug Revlimid, used to treat patients with multiple myeloma, a cancer of blood plasma cells.
The Dow Jones industrials ($INDU) closed down 251 points to 12,574. The S&P 500 dropped 30 points to 1,326, and the Nasdaq Composite Index ($COMPX) fell 71 points to 2,859, its first decline after five straight gains. The losses for the three indexes were their worst since June 1, when the Dow fell 275 points in its biggest loss of the year.
Article continues below.
The Nasdaq-100 Index ($NDX) was off 66 points to 2,557. Bed Bath & Beyond and Celgene contributed 20 points to the loss by themselves. Apple (AAPL), the biggest influence on the index, was up off $8.07 to to $577.67, subtracting 7 points from the index. Microsoft (MSFT), the publisher of MSN Money, was off 80 cents to $30.14, taking 6 points off the index.
The sell-off came after the Federal Reserve cut its projections for economic growth over the next few years amid a slowdown in hiring and concerns about Europe and potential dislocations from an abrupt decline in federal spending next year. Futures trading suggests stocks will open higher on Friday.
Big investment bank ratings are cut
Adding to the market's stress was a decline in financial stocks. Moody's Investors Service downgraded 15 banks with large capital-markets businesses after today's close. The downgrades came after a review that began in February.
The companies affected were:
Citigroup (C), Morgan Stanley (MS), JPMorgan Chase (JPM), HSBC (HBC), Bank of America (BAC), Goldman Sachs (GS), Credit Suisse (CS), UBS (UBS), Royal Bank of Canada (RY), Royal Bank of Scotland (RBS), Barclays (BCS), BNP Parisbas (BNPQY), Societe Generale (SCGLY), Credit Agricole (CRARY) and Deutsche Bank (DB).
Shares of all the companies were lower in regular trading. The shares of the U.S. banks, however, were all higher after hours.
Morgan Stanley rose 44 cents, or 3.2%, to $14.40. Most analysts had expected its rating to be cut 3 notches. It was cut 2 notches to Baa1 from A2.
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| Crude oil (-CL) | $78.20 | $81.45 | -9.63% | -20.87% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Heating oil (-HO) | $2.5231 | $2.5846 | -6.66% | -13.42% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Natural gas (-NG) | $2.5820 | $2.5170 | 6.61% | -13.62% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Unleaded gasoline (-RB) | $2.4520 | $2.5073 | -9.94% | -7.73% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Brent crude | $89.50 | $92.69 | -12.14% | -16.65% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Retail gasoline | $3.4720 | $3.4870 | -4.09% | 5.98% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jobless claims have hit a plateau; home sales dip
Jobless claims fell to a seasonally adjusted 387,000 in the week ending June 15 from 389,000 in the week of June 9. The bad news was that the June 9 figure was revised upward from an originally reported 386,000. Moreover, the weekly claims have climbed by about 25,000, or roughty 7%, from 362,000 at the end of March.
Existing-home sales fell 1.5% from April to a seasonally adjusted 4.55 million in May, the National Association of Realtors reported today. The sales rate, however, was up 9.6% from a year ago. The median price of a home rose 7.9% from a year ago to $182,600, with prices highest in the Northeast at $250,700.
The decline was attributed to tightening supplies of lower-priced homes across the country. The trade organization pleaded for banks to expedite their foreclosure processes to boost the supply. It wasn't all that long ago that Realtors worried that foreclosures would flood local markets and hurt prices.
A bothersome Philly Fed report
The Philly Fed Index fell from a reading of -5.6 in May to -16.6 in June for current activity, its second monthly decline in a row. The index is the popular term for the closely watched Business Outlook Survey of the Federal Reserve Bank of Philadelphia.
New orders, shipments and average work hours were all negative this month, suggesting overall declines in business. For the second straight month, more companies reported more price declines for their products than price indications.
The survey’s indicators of future activity remained positive and improved slightly, suggesting that the current weakness in activity may be short-lived.
Oil prices tumble; gold drops
Crude oil in New York settled down $3.25 to $78.20 a barrel, its lowest price since since Oct. 4, 2011, when it closed at $75.67 a barrel. Crude is down 24% this quarter alone and 20.9% for the year.
Brent crude settled at $89.23, down $3.46. It was Brent's lowest close since Dec. 1, 2010. It's off 27.4% this quarter and 16.9% for the year.
The national average retail price of gasoline was $3.472 a gallon, down from Wednesday's $3.487, according to AAA's Daily Fuel Gauge Report. It's off 11.8% since peaking in early April but up 6% for the year.
Chevron (CVX) and Exxon Mobil (XOM) were off $3.61 to $100.02 and $2.86 to $82.11, respectively.
Gold (-GC) settled down $50.30, or 3.1%, to $1,565.50 an ounce. Silver (-SI) dropped to $26.839 an ounce, down $1.55, or 5.5%. Copper (-HG) was off 8.95 cents, or 2.6%, to $3.298 a pound.
Interest rates were lower, with the 10-year Treasury yield falling to 1.608% from 1.642% on Monday.
Only two of the 30 Dow stocks closed higher: Merck (MRK), up 24 cents to $39.45, and Verizon Communications (VZ), up 3 cents to $43.33. Pfizer (PFE) suffered a small loss: 7 cents to $22.60, respectively. The laggards were Alcoa (AA), down 37 cents to $8.55, and Intel (INTC), down 93 cents to $26.71.
Five stocks -- IBM (IBM), Chevron, Exxon, Caterpillar (CAT) and Boeing (BA) -- contributed nearly 119 points to the Dow's loss by themselves.
Only 12 S&P 500 stocks were higher on the day, led by media company Gannett (GCI) and Conagra Foods (CAG), which reported better-than-expected quarterly earnings. The two were up 42 cents to $13.47 and 66 cents to $25.26, respectively.
Bed Bath & Beyond and Celgene were the S&P-500 laggards. They were also the laggards among Nasdaq-100 stocks.
All of the Nasdaq-100 stocks were lower.
We should note that Facebook (FB) was one of the rare winners on the day, rising 24 cents to $31.84. The shares were higher after hours as Nomura Securities analyst Brian Nowak initiated coverage of the stock with a "buy" rating.
| Short hits from the markets -- New York close | ||||||||||||
| Thur. | Wed. | Month chg. | YTD chg. | |||||||||
| Treasury yields | ||||||||||||
| 13-week Treasury bill | 0.0700% | 0.090% | 0.00% | 600.00% | ||||||||
| 5-year Treasury note | 0.725% | 0.744% | 8.05% | -12.65% | ||||||||
| 10-year Treasury note | 1.618% | 1.642% | 2.34% | -13.52% | ||||||||
| 30-year Treasury bond | 2.688% | 2.724% | 0.60% | -6.96% | ||||||||
| Currencies | ||||||||||||
| U.S. Dollar Index | 82.488 | 81.734 | -0.77% | 2.44% | ||||||||
| British pound | 1.5598 | 1.5716 | 1.20% | 0.39% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in pounds | £0.641 | £0.636 | -1.19% | -0.39% | ||||||||
| Euro in dollars | $1.25 | $1.27 | 1.51% | -3.16% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in euros | € 0.797 | € 0.787 | -1.48% | 3.27% | ||||||||
| U.S. $ in yen | 80.39 | 79.47 | 2.33% | 4.26% | ||||||||
| U.S. $ in Chinese | 6.39 | 6.36 | 0.08% | 0.96% | ||||||||
| yuan | ||||||||||||
| Canada dollar | $0.972 | $0.982 | 0.40% | -0.89% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. dollar | $1.029 | $1.018 | -0.40% | 0.90% | ||||||||
| (in Canadian $) | ||||||||||||
| Commodities | ||||||||||||
| Gold (-GC) | $1,565.50 | $1,615.80 | 0.08% | -0.08% | ||||||||
| (per troy ounce) | ||||||||||||
| Copper (-HG) | $3.298 | $3.388 | -2.01% | -4.02% | ||||||||
| (per pound) | ||||||||||||
| Silver (-SI) | $26.8390 | $28.3890 | -3.31% | -3.85% | ||||||||
| (per troy ounce) | ||||||||||||
| Wheat (-ZW) | $6.6175 | $6.6400 | 2.80% | 1.38% | ||||||||
| (per bushel) | ||||||||||||
| Corn (-ZC) | $5.5000 | $5.665 | -0.95% | -14.93% | ||||||||
| (per bushel) | ||||||||||||
| Cotton | $0.7817 | 0.8317 | 9.25% | -14.74% | ||||||||
| (per pound) | ||||||||||||
| Coffee | $1.5880 | 1.524 | -2.55% | -30.85% | ||||||||
| (per pound) | ||||||||||||
| Crude oil (-CL) | $78.20 | $81.45 | -9.63% | -20.87% | ||||||||
| (per barrel) | ||||||||||||
THE RIVER OF MONEY (Simplistic). Part 1. In parts because of the spam filters.
Water (money) is created in the mountains of the Fed and flows down in a river to it's people as a trading unit for work and services performed. The people used this water instead of barter to buy goods and services from each other. They watered their crops and harvested and sold any excess for more water.
As some become more successful, they built storage places to store the excess water to be used in the future for any mishap that could befall them. While others used all they had because they were less successful and were not good farmers because of the soil, or terrain.
Water was taken as taxes for the economic activity and was sent back to the Fed to be sent down the mountain again.
As taxes were reduced, and the Fed didn't want to drown the countryside, the river from the Fed became smaller and smaller.
Some people who became so successful that they were able to put up dams to hold all their excess water. After a long while, as those who were successful soon had huge dams of excess water. As the amount of the flow of water used in trade for goods and services became less and less from the stockpiling of water by the successful ones, the people had less and less of the water to go around.
Without water, their crops began to fail and those who were successful were able to pay less and less for the services and goods they received because the supply of water had became so tight.
The Fed, realizing the majority of people were hurting started making more water to send down the river to keep trade going so the people would not starve and trade would not be impeded.
The problem was not that there was not enough water, but rather the water was in storage, like during the oil crisis of the (70s) that was made worse by people keeping their gas tanks full all the time and using up the available supply. If those with the stored water used it as it was intended, rather than stored, the shortage would not have occurred. To much stored water in the hands of the successful is not good for the rest of the people.
The people who were able to store the water are not to blame. They were doing what was best for them. That's the way it should be. Taxes should have keep the stored surplus from becoming too big in the first place, like in Germany. We want the people of this country to be successful. We want them to work hard and receive compensation that will let them live long productive lives. We all benefit from the work and services we produce. That was the promise of this country. We also have a trade deficit of over 1/2 trillion dollars a year. Like a river of money flowing out of this country and along with it, jobs. Our trading partners should either buy more of our goods or services or we should buy less of theirs. Trade wars are not the answer, but something should be done to nudge them to be better trading partners.
lo2,
That's the whole basis to buying and selling stocks. If you wait until the "ink is dry" on the news, then you have waited to late to react to the news, and surely can't benefit from the news. That's why buying and selling stocks is all about SPECULATION.
Don't hate the players..... hate the game!
If the President picked his nose and he went too deep and blood came out Wall Street would make it an issue to have people sell their stocks at a bargain price!!!! I can see the headline now! President has bloody nose, are we losing our leader??? Oh, my the sky is falling in , the sky is falling in. The trouble with Wall Street is that they do business on the odd's and the crystal ball effect! Never have I seen Wall Street make decisions on certain facts versus what if's. If you are going to go business with Wall Steet or any financial market you need to face facts that they don't use sound business principles. And to think there are people who sware by their lives that the financial markets are the true economic indicator of the world. Any institution that works on Las Vegas type principles is nothing more then people placing a bet who will win the NBA Title!
"The market was also hurt by a Goldman Sachs recommendation today that investors short the entire Standard & Poor's 50O Index ($INX -2.23%), believing the index is headed to 1,285, a 3% decline from its current level."
Good job Goldman. I recommend investors short you. While you're at it, short some of those ratings agencies too.
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