U.S. stocks tumble

July 28, 2010
Market Update

US stocks closed lower Wednesday, with the Dow Jones Industrial Average breaking a four-session win streak, as reports showing clouds over the US economy dimmed any enthusiasm over corporate earnings reports. Total volume was just 1B shares on the NYSE.

Dow Jones 10,497.88 -39.81 (-0.38%)
S&P 500 1,106.13 -7.71 (-0.69%)
Nasdaq 2,264.56 -23.69 (-1.04%)
Crude Oil 76.92 - 0.09%
Natural Gas 4.77 + 2.12%
Gasoline 2.06 -
Heating Oil 2.00 -
Gold 1163.38 + 0.09%
Silver 17.52 - 0.74%
Copper 3.24 + 1.09%

World Markets

Shanghai 2,633.66 +58.30 (2.26%)
Nikkei 225 9,753.27 +256.42 (2.70%)
Hang Seng 21,091.18 +117.79 (0.56%)
TSEC 7,784.81 +36.80 (0.47%)
FTSE 100 5,319.68 -45.99 (-0.86%)
CAC 40 3,670.36 +3.96 (0.11%)
S&P TSX 11,686.52 -30.17 (-0.26%)
S&P/ASX200 4,529.90 +32.50 (0.72%)
BSE Sensex17,957.37 -120.24 (-0.67%)



US Stocks Solidly Lower

U.S. stocks move between small gains and losses as investors worry about mixed earnings reports and a drop in demand for U.S. manufactured durable goods. The gloomy economic assessment from the Federal Reserve added more notes of pessimism to the fragile economic recovery, sending U.S. stocks deeper into the red in late trading Wednesday.

The Dow Jones Industrial Average deepened its losses after the beige book release, falling 83 points, or 0.6%, at 10474 with less than an hour to go in the trading day. The Standard & Poor's 500-stock index declined 0.7% to 1107, while the Nasdaq Composite lost 1.3% at 2259. The markets traded on soft volumes, spending most of the day in a narrow trading range before heading lower in the afternoon.

The day's declines were driven by a mixed package of corporate earnings and growing macroeconomic worries.

The Fed's latest beige book report of economic conditions showed improvement in most of its 12 regional districts, but with only modest advances in retail sales and weak numbers in housing and construction. Bank lending, meanwhile, was still tight.

Demand for U.S. manufactured durable goods slides for a second consecutive month in June in another sign the manufacturing sector expansion is slowing. Economists expected a 1.1% gain.

The U.S. Commerce Department said durable-goods orders slid in June for a second-straight month, falling by 1%. Economists had predicted a 1.1% gain. The Federal Reserve in its latest beige book report said U.S. economic activity in June rose only modestly, another sign that the economic recovery is slowing.

The recent slowdown in the U.S. economy should prove transient, although it will take years for the nation's unemployment rate to fall toward more acceptable levels, an official at the Federal Reserve Bank of San Francisco said Wednesday.

Steven Ricchiuto, chief economist at Mizuho Securities U.S.A. said, "My take on the data is that it fits with the economy losing upside momentum as the second quarter progressed and this will show up in the second quarter GDP report due out this Friday."

"The recent softness in the economic data looks much more like a bump in the road of what we already thought would be a gradual recovery, rather than a swerve into the ditch," said John Williams, the bank's executive vice president and director of research. He noted that "monetary policy remains highly supportive of recovery" and "interest rates are extraordinarily low."

"Unemployment will come down with agonizing slowness," Williams said, according to a transcript of his remarks.

Wednesday's Fed report "was fairly consistent with the other macroeconomic indicators we've seen in the past month," said Dorsey Farr, partner at French Wolf & Farr, an investment advisory firm in Atlanta. "The question is, is this the beginning of a more serious slowdown in the recovery or just a natural leveling off?"

Farr said he was encouraged by sustained signs of temporary hiring, which he said could be a precursor to more robust permanent hiring. But he also noted that consumer spending remained weak and remained centered around necessity buying, rather than big-ticket items.

The euro struggled to hold onto the $1.30 level, trading recently at $1.2979, down from $1.3003 late Tuesday in New York. The U.S. Dollar Index, which tracks the U.S. currency against six others, was flat.


Oil futures fell below $77 a barrel.

Crude futures fell slightly Wednesday, as mixed economic data and a report on U.S. oil inventories kept traders wary about demand in a sluggish recovery.

Light, sweet crude for September delivery settled 51 cents, or 0.8%, lower at $76.99 a barrel on the New York Mercantile Exchange, hanging tightly to the middle of a trading range that has contained futures for several weeks. Brent crude on the ICE futures exchange settled at 7 cents lower at $76.06 a barrel.

Oil prices couldn't commit to moving in either direction for most of the session, even as government data offered a gloomy window onto the economic recovery.

The weekly report from the Department of Energy showed a build in crude oil stockpiles that surprised analysts, who had been predicting a decline. But the report showed some gains in demand, helping to contain futures losses. A 7.3-million-barrel build in crude stockpiles.

Gasoline stockpiles rose by 100,000 barrels, below analyst expectations for a build of 500,000 barrels, and distillates, which includes heating oil and diesel, rose by 900,000 barrels, while analysts projected a 2.1-million-barrel increase. Refinery use fell to 90.6%, below analysts' estimate for 91% utilization.

Front-month August reformulated gasoline blendstock, or RBOB, settled 0.02 cent higher at 2.0634 a gallon. August heating oil settled 0.3 cent lower at 1.9964 a gallon.


European stocks closed marginally lower

Most European shares dropped Wednesday, breaking a six-session winning streak, as an unexpected decline in U.S. durable-goods orders rekindled worries over economic growth and outweighed positive earnings reports from companies including Infineon Technologies and Deutsche Boerse.

"Europe today is showing signs of near-term weariness after the recent rally that has carried it from its first-half low on May 25," said John Stoltzfus, senior market strategist at Ticonderoga Securities.

The pan-European Stoxx 600 index ended down 0.3% at 257.21. The U.K.'s FTSE 100 closed down 0.9% at 5319.68 and Germany's DAX fell 0.5% to 6178.94. But France's CAC-40 managed to eke a small gain, closing up 0.1% at 3670.36.

European indexes started the session higher, led by bank stocks. Starting with the release of stress test results last Friday, the sector has enjoyed a string of good news, including strong earnings from UBS and Deutsche Bank Tuesday as well as less severe liquidity and capital rules coming out of the Basel III bank reform negotiations late Monday.

Portugal's PSI-20 stock index gained 1% after Portugal Telecom agreed to sell its stake in Brazil's Vivo Participacoes to Spain's Telefonica for EUR7.5 billion ($9.74 billion).

French banks added to recent gains. Shares of BNP Paribas gained 2.2% and Societe Generale added 1.8%. Notable earnings-related advancers included: Deutsche Boerse, which ended up 4.1%. Second-quarter net profit at the German exchange operator dipped to EUR160.8 million, but comfortably exceeded analyst forecasts for a profit of EUR144 million.

Positive effects from the European stress tests are being felt in funding markets, as Spain's Banco Bilbao Vizcaya Argentaria begins taking orders for its new five-year bond issue, the first benchmark-sized bond from a Spanish borrower since mid-April.

On Thursday, investors will be eyeing German unemployment figures at 0755 GMT, euro-zone confidence indicators at 0900 GMT and U.S. initial jobless claims at 1230 GMT.


South African Government Workers Set To Strike

South African teachers, nurses and other government workers are preparing to walk off the job next month after wage negotiations deadlocked, labor unions representing close to 1 million workers said Wednesday.

A strike could disrupt tourism to the country in the wake of the successful staging of the soccer World Cup that ended earlier this month. A four-week strike by some 600,000 civil servants three years ago affected hospitals and schools and was marred by incidents of violence.

"We have now come to a firm conclusion that we go on strike. Therefore we will today [Wednesday] serve government with a notice to strike," eight unions said in a joint statement.

Thursday's Calendar

12:30 p.m.
Jul 24 Unemployment Insurance Weekly Claims Report - Initial Claims Weekly Jobless Claims (expected 460K) Weekly Jobless Claims Net Change (expected -4K) Cont Jobless Claims (prior week) (previous 4487000) Cont Jobless Claims Net Chg (prior week) (previous -223K)

2:00 p.m.
Jul 17 DJ-BTMU U.S. Business Barometer DJ-BTMU Business Barometer (previous +0.9%) DJ-BTMU Business Barometer (52 Wk) (previous +6.2%)

2:30 p.m.
Jul 23 EIA Weekly Natural Gas Storage Report Total Working Gas in Storage (previous 2891B) Total Working Gas in Storage (Net Change) (previous +51B)

3:00 p.m.
Jul Federal Reserve Bank of Kansas City Survey of Tenth District Manufacturing Manufacturing Activity Index (previous 3) Manufacturing Activity Index (6 Mon) (previous 21)

5:20 p.m.
Dallas Fed Pres Fisher speaks on the economy in San Antonio, Texas

8:30 p.m.
Money Stock Measures

8:30 p.m.
Jul 28 Foreign Central Bank Holdings Foreign US Debt Holdings (previous 3.14T) US Foreign Agency Holdings (previous 831.15B) Foreign Treasury Holdings (previous 2.31T)

8:30 p.m.
Jul 28 Federal Discount Window Borrowings Primary Credit Borrowings (previous 49M) Primary Credit Borrowings W/E Daily Avg (previous 25M) Discount Window Borrowings (previous 65.55B) Discount Window Borrowings W/E Daily Avg (previous 65.91B)