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Retailers, banks pull stocks lower; Dow slides 146
June 25, 2010, Friday
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STOCKS fell yesterday following disappointing forecasts from retailers and concern about the government's financial overhaul package.
The Dow Jones industrial average lost 146 points after edging higher Wednesday. Broader indexes dropped for a fourth straight day.
Downbeat forecasts from retailers raised concerns that high unemployment and weak consumer spending would stall an economic rebound. Athletic apparel maker Nike Inc. dropped 4 percent after saying higher costs could hurt earnings. Bed Bath & Beyond fell 2.4 percent after the home goods retailer's second-quarter earnings forecast missed expectations.
Dell Inc. lost 6.4 percent after the computer maker's fiscal year forecast failed to top expectations, as some analysts had hoped.
Meanwhile, financial stocks fell after Congress continued working on a bill to overhaul regulation of the industry. Democratic leaders hoped to reconcile the House and Senate bills by yesterday evening so President Barack Obama can have a deal in place by the time he meets with the leaders of the Group of 20 nations this weekend in Toronto.
Traders were concerned that some provisions of the bill would cut into bank profits. Large banks were lobbying to strike a proposal that would make the industry cover costs to dismantle the mortgage giants Fannie Mae and Freddie Mac. Bank of America Corp. dropped 2.7 percent and JPMorgan Chase & Co. lost 2.2 percent.
Stocks of health care and consumer products companies rose, another sign that investors are anxious and looking for investments considered reliable in a weak economy.
Economic news didn't help. The government said initial claims for unemployment benefits fell last week but remained above the level that would signal employers are ramping up hiring. A second report indicated that orders for durable goods fell last month for the first time in six months. Orders for big-ticket goods fell 1.1 percent in May. Analysts predicted a 1.3 percent drop.
The latest reports showed there are "substantive holes in the economic recovery story," said Tom Samuels, portfolio manager of the Palantir Fund in Houston.
The Dow fell 145.64, or 1.4 percent, to 10,152.80. The Standard & Poor's 500 index fell 18.35, or 1.7 percent, to 1,073.69. It was the first four-day drop for the S&P 500 index since early May. The Nasdaq composite index fell 36.81, 1.6 percent, to 2,217.42.
Interest rates were mixed in the Treasury market. The yield on the benchmark 10-year Treasury note rose to 3.14 percent from 3.12 percent late Wednesday. The yield had fallen to a 13-month low of 3.07 percent.
The recent drop in rates is good news for borrowers. Freddie Mac said yesterday that the cost of a home loan has fallen this week to the lowest level on record. The average rate on a 30-year fixed mortgage dropped to 4.69 percent from 4.75 percent last week.
Crude oil rose 16 cents to settle at US$76.51 a barrel on the New York Mercantile Exchange.
The market's moves were also being driven by traders preparing for changes Friday to some of the stocks that make up the Russell 2000 index of smaller companies. The Russell 2000 fell 11.08, or 1.7 percent, to 633.17.
The slump in stocks made clear that anxiety is still ruling the market, after appearing to have waned last week. The Dow and other major stock indexes fell to their 2010 lows early this month, then regained some ground as fears about a debt blowup in Europe began to ease.
Now, the concern is that cracks are appearing in the U.S. recovery. Since last week, several reports on housing and jobs have indicated that the economy's biggest trouble spots aren't getting much better. Even manufacturing, which has been one of the strongest areas of the economy, looked weaker in one report last week. Analysts warn that it's misleading to draw big conclusions from a few reports but investors will want to see some better numbers for stocks to resume their climb.
The unemployment and durable goods orders reports come a day after the Fed said the economy is continuing to recover, but that risks remain. The government said Wednesday that sales of new homes fell last month to the lowest level on record.
Mike Rubino, CEO of Rubino Financial Group in Troy, Michigan, said investors had been expecting the economy to improve "at a much faster level" than they're seeing. That disappointment has pulled stocks from their 2010 highs in late April.
The government is set to release an updated reading Friday on gross domestic product for the first quarter.
The concerns about the recovery increased yesterday. Major European markets fell on worries that Greece will have problems containing its debt problems.
Among stocks, Nike fell US$2.89, or 4 percent, to US$69.63, while Bed Bath & Beyond fell 89 cents, or 2.4 percent, to US$35.74.
Bank of America fell 41 cents, or 2.7 percent, to US$15.02 and JPMorgan dropped 86 cents, or 2.2 percent, to US$38.03.
Rising stocks included health care and consumer products maker Johnson & Johnson, up 61 cents at US$59.60.
More than three stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.3 billion shares, compared with 1.1 billion Wednesday.
In Europe, Britain's FTSE 100 fell 1.5 percent, Germany's DAX index dropped 1.4 percent, and France's CAC-40 fell 2.4 percent.
The Dow Jones industrial average lost 146 points after edging higher Wednesday. Broader indexes dropped for a fourth straight day.
Downbeat forecasts from retailers raised concerns that high unemployment and weak consumer spending would stall an economic rebound. Athletic apparel maker Nike Inc. dropped 4 percent after saying higher costs could hurt earnings. Bed Bath & Beyond fell 2.4 percent after the home goods retailer's second-quarter earnings forecast missed expectations.
Dell Inc. lost 6.4 percent after the computer maker's fiscal year forecast failed to top expectations, as some analysts had hoped.
Meanwhile, financial stocks fell after Congress continued working on a bill to overhaul regulation of the industry. Democratic leaders hoped to reconcile the House and Senate bills by yesterday evening so President Barack Obama can have a deal in place by the time he meets with the leaders of the Group of 20 nations this weekend in Toronto.
Traders were concerned that some provisions of the bill would cut into bank profits. Large banks were lobbying to strike a proposal that would make the industry cover costs to dismantle the mortgage giants Fannie Mae and Freddie Mac. Bank of America Corp. dropped 2.7 percent and JPMorgan Chase & Co. lost 2.2 percent.
Stocks of health care and consumer products companies rose, another sign that investors are anxious and looking for investments considered reliable in a weak economy.
Economic news didn't help. The government said initial claims for unemployment benefits fell last week but remained above the level that would signal employers are ramping up hiring. A second report indicated that orders for durable goods fell last month for the first time in six months. Orders for big-ticket goods fell 1.1 percent in May. Analysts predicted a 1.3 percent drop.
The latest reports showed there are "substantive holes in the economic recovery story," said Tom Samuels, portfolio manager of the Palantir Fund in Houston.
The Dow fell 145.64, or 1.4 percent, to 10,152.80. The Standard & Poor's 500 index fell 18.35, or 1.7 percent, to 1,073.69. It was the first four-day drop for the S&P 500 index since early May. The Nasdaq composite index fell 36.81, 1.6 percent, to 2,217.42.
Interest rates were mixed in the Treasury market. The yield on the benchmark 10-year Treasury note rose to 3.14 percent from 3.12 percent late Wednesday. The yield had fallen to a 13-month low of 3.07 percent.
The recent drop in rates is good news for borrowers. Freddie Mac said yesterday that the cost of a home loan has fallen this week to the lowest level on record. The average rate on a 30-year fixed mortgage dropped to 4.69 percent from 4.75 percent last week.
Crude oil rose 16 cents to settle at US$76.51 a barrel on the New York Mercantile Exchange.
The market's moves were also being driven by traders preparing for changes Friday to some of the stocks that make up the Russell 2000 index of smaller companies. The Russell 2000 fell 11.08, or 1.7 percent, to 633.17.
The slump in stocks made clear that anxiety is still ruling the market, after appearing to have waned last week. The Dow and other major stock indexes fell to their 2010 lows early this month, then regained some ground as fears about a debt blowup in Europe began to ease.
Now, the concern is that cracks are appearing in the U.S. recovery. Since last week, several reports on housing and jobs have indicated that the economy's biggest trouble spots aren't getting much better. Even manufacturing, which has been one of the strongest areas of the economy, looked weaker in one report last week. Analysts warn that it's misleading to draw big conclusions from a few reports but investors will want to see some better numbers for stocks to resume their climb.
The unemployment and durable goods orders reports come a day after the Fed said the economy is continuing to recover, but that risks remain. The government said Wednesday that sales of new homes fell last month to the lowest level on record.
Mike Rubino, CEO of Rubino Financial Group in Troy, Michigan, said investors had been expecting the economy to improve "at a much faster level" than they're seeing. That disappointment has pulled stocks from their 2010 highs in late April.
The government is set to release an updated reading Friday on gross domestic product for the first quarter.
The concerns about the recovery increased yesterday. Major European markets fell on worries that Greece will have problems containing its debt problems.
Among stocks, Nike fell US$2.89, or 4 percent, to US$69.63, while Bed Bath & Beyond fell 89 cents, or 2.4 percent, to US$35.74.
Bank of America fell 41 cents, or 2.7 percent, to US$15.02 and JPMorgan dropped 86 cents, or 2.2 percent, to US$38.03.
Rising stocks included health care and consumer products maker Johnson & Johnson, up 61 cents at US$59.60.
More than three stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.3 billion shares, compared with 1.1 billion Wednesday.
In Europe, Britain's FTSE 100 fell 1.5 percent, Germany's DAX index dropped 1.4 percent, and France's CAC-40 fell 2.4 percent.
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