U.S. stocks slump as Dow falls 100 points
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U.S. stocks slump as Dow falls 100 points
CBS MarketWatch
U.S. stocks slump as Dow falls 100 points
Wednesday July 9, 1:11 pm ET
By Steve Gelsi
NEW YORK (CBS.MW) -- Blue-chip stocks stumbled Wednesday, with the Dow Jones Industrial Average dropping more than 100 points thanks to losses by Altria, Alcoa and Home Depot.
"We've been thinking the market's an up market, but that doesn't mean there won't be pauses in any given day or week," said Clark Yingst, chief equity strategist at Joseph Gunnar.
In early afternoon trading, the Dow (CBOT^DJINews) was down 90, or 1 percent, at 9,131.
Among Dow components, Altria (NYSEMONews) slid 8.4 percent to $42.86. A Morgan Stanley analyst's report highlighted liability issues looming over the parent of tobacco giant Philip Morris. Separately, The Wall Street Journal reported that rivals R.J. Reynolds (NYSERJRNews) and Brown & Williamson have held discussions to merge their tobacco operations
The Nasdaq Composite Index (NasdaqSC^IXICNews) fell 7 points, or 0.4 percent, to 1,738. Earlier in the session, the tech-heavy index was up following positive comments from Cisco Systems (NasdaqNMCSCONews) , which said it sees a rebound in information-technology spending.
The S&P 500 (CBOE^SPXNews) lost 7 points, or 0.8 percent, to 1,000.
Decliners outnumbered advancers on the New York Stock Exchange by 19 to 12 and by 16 to 14 on the Nasdaq. Volume on the Big Board was 764 million, and 1.1 billion on the Nasdaq.
Many investors remain uncertain whether the market's strong gains in recent months constitute a bear market correction, or the start of a new bull market, Yingst said.
"This rally has more legs, better breadth, more resiliency and good leadership from the technology and financial sector," he said. "There's no comparison to other bear market rallies to me, but the debate continues."
Yahoo report due
Wall Street is looking to Internet giant Yahoo (NasdaqNMYHOONews) , which is due to post second-quarter results after the closing bell, for cues on whether to start buying again, Yingst said. Yahoo is expected to earn 8 cents a share on revenue of $315.1 million, according to Thomson First Call. Yahoo shares were down 16 cents to $34.94.
Jim Awad, chairman of Awad Investment Management, said stock prices are no longer cheap and sentiment has become too bullish.
"You'll see a mixed bag on second-quarter earnings and guidance, but I don't expect it to derail the upward momentum of the market," he said.
Among the losing sectors, banking stocks (NasdaqSC^IXBKNews) fell 0.8 percent and insurance shares (CBOE^IUXNews) dropped 1.2 percent. Retail stocks (CBOE^RLXNews) gave up 1.4 percent and Internet stocks (CBOE^GINNews) dropped 1.3 percent.
Oil services stocks (Philadelphia^OSXNews) rose 2 percent and networking stocks (CBOE^GIPNews) added 0.8 percent. Gold stocks (CBOE^GOXNews) added 0.7 percent.
On the economic front, rising interest rates and the vacation season marked an abrupt drop in mortgage lending volume last week, according to the Mortgage Bankers Association.
The industry group said applications dropped nearly 18 percent from the previous week. Refinance applications dropped 21 percent and purchase applications fell 5.5 percent. The average rate for a 30-year fixed-rate mortgage rose to 5.37 percent from 5.23 percent the previous week.
U.S. wholesalers trimmed their inventories 0.3 percent in May as sales slowed 0.5 percent, the Commerce Department reported.
The inventory-to-sales ratio remained at a tight 1.24, close to the record low 1.21 reached in March. Inventories also fell 0.3 percent in April.
Analyst Wayne Atwell at Morgan Stanley downgraded Alcoa (NYSEAANews) to "equal weight" from "overweight," citing the aluminum company's plans to invest in low return projects over the next three to four years, poor results from its diversification program and limited near-term financial flexibility resulting from a highly leveraged balance sheet. Atwell said he believes the company will need to close some smelting operation to lower costs. Alcoa was the first Dow component to post second-quarter earnings. The stock gave up 2.8 percent to $25.10.
Options expensing
Microsoft (NasdaqNMMSFTNews) is in the spotlight after the software giant said it would pay employees with restricted stock instead of stock options. The move is expected to have a big impact in the tech sector and among other blue chips. Shares fell 39 cents to $27.31.
Analyst Michael Mayo at Prudential raised his rating on Citigroup (NYSECNews) to "hold" from "sell," citing an increased earnings outlook resulting from "unique positioning" and low rates, expectations of a 20 percent dividend hike and the belief that trading revenue may be more sustainable. Mayo also upped his second-quarter earnings forecast, for the second time in a month, to 82 cents a share from 80 cents, and his full-year estimate to $3.35 a share from $3.30. Shares rose 47 cents to $45.85, a new 52-week high.
Intel Corp. (NasdaqNMINTCNews) rose 39 cents to $23.54 as UBS raised its price target on the stock to $29 from $26 ahead of Intel's second quarter earnings, slated for release on July 15.
"While we do not expect Intel to materially beat our $6.7 billion sales estimate for the second quarter, we do believe that the Centrino [wireless chip] results will be strong," the broker said.
In the bond market, Treasurys gained traction as money ebbed out of stocks. The 10-year note rose 5/32 to yield 3.69 percent, down four basis points from 3.73 percent on Tuesday.
U.S. stocks slump as Dow falls 100 points
Wednesday July 9, 1:11 pm ET
By Steve Gelsi
NEW YORK (CBS.MW) -- Blue-chip stocks stumbled Wednesday, with the Dow Jones Industrial Average dropping more than 100 points thanks to losses by Altria, Alcoa and Home Depot.
"We've been thinking the market's an up market, but that doesn't mean there won't be pauses in any given day or week," said Clark Yingst, chief equity strategist at Joseph Gunnar.
In early afternoon trading, the Dow (CBOT^DJINews) was down 90, or 1 percent, at 9,131.
Among Dow components, Altria (NYSEMONews) slid 8.4 percent to $42.86. A Morgan Stanley analyst's report highlighted liability issues looming over the parent of tobacco giant Philip Morris. Separately, The Wall Street Journal reported that rivals R.J. Reynolds (NYSERJRNews) and Brown & Williamson have held discussions to merge their tobacco operations
The Nasdaq Composite Index (NasdaqSC^IXICNews) fell 7 points, or 0.4 percent, to 1,738. Earlier in the session, the tech-heavy index was up following positive comments from Cisco Systems (NasdaqNMCSCONews) , which said it sees a rebound in information-technology spending.
The S&P 500 (CBOE^SPXNews) lost 7 points, or 0.8 percent, to 1,000.
Decliners outnumbered advancers on the New York Stock Exchange by 19 to 12 and by 16 to 14 on the Nasdaq. Volume on the Big Board was 764 million, and 1.1 billion on the Nasdaq.
Many investors remain uncertain whether the market's strong gains in recent months constitute a bear market correction, or the start of a new bull market, Yingst said.
"This rally has more legs, better breadth, more resiliency and good leadership from the technology and financial sector," he said. "There's no comparison to other bear market rallies to me, but the debate continues."
Yahoo report due
Wall Street is looking to Internet giant Yahoo (NasdaqNMYHOONews) , which is due to post second-quarter results after the closing bell, for cues on whether to start buying again, Yingst said. Yahoo is expected to earn 8 cents a share on revenue of $315.1 million, according to Thomson First Call. Yahoo shares were down 16 cents to $34.94.
Jim Awad, chairman of Awad Investment Management, said stock prices are no longer cheap and sentiment has become too bullish.
"You'll see a mixed bag on second-quarter earnings and guidance, but I don't expect it to derail the upward momentum of the market," he said.
Among the losing sectors, banking stocks (NasdaqSC^IXBKNews) fell 0.8 percent and insurance shares (CBOE^IUXNews) dropped 1.2 percent. Retail stocks (CBOE^RLXNews) gave up 1.4 percent and Internet stocks (CBOE^GINNews) dropped 1.3 percent.
Oil services stocks (Philadelphia^OSXNews) rose 2 percent and networking stocks (CBOE^GIPNews) added 0.8 percent. Gold stocks (CBOE^GOXNews) added 0.7 percent.
On the economic front, rising interest rates and the vacation season marked an abrupt drop in mortgage lending volume last week, according to the Mortgage Bankers Association.
The industry group said applications dropped nearly 18 percent from the previous week. Refinance applications dropped 21 percent and purchase applications fell 5.5 percent. The average rate for a 30-year fixed-rate mortgage rose to 5.37 percent from 5.23 percent the previous week.
U.S. wholesalers trimmed their inventories 0.3 percent in May as sales slowed 0.5 percent, the Commerce Department reported.
The inventory-to-sales ratio remained at a tight 1.24, close to the record low 1.21 reached in March. Inventories also fell 0.3 percent in April.
Analyst Wayne Atwell at Morgan Stanley downgraded Alcoa (NYSEAANews) to "equal weight" from "overweight," citing the aluminum company's plans to invest in low return projects over the next three to four years, poor results from its diversification program and limited near-term financial flexibility resulting from a highly leveraged balance sheet. Atwell said he believes the company will need to close some smelting operation to lower costs. Alcoa was the first Dow component to post second-quarter earnings. The stock gave up 2.8 percent to $25.10.
Options expensing
Microsoft (NasdaqNMMSFTNews) is in the spotlight after the software giant said it would pay employees with restricted stock instead of stock options. The move is expected to have a big impact in the tech sector and among other blue chips. Shares fell 39 cents to $27.31.
Analyst Michael Mayo at Prudential raised his rating on Citigroup (NYSECNews) to "hold" from "sell," citing an increased earnings outlook resulting from "unique positioning" and low rates, expectations of a 20 percent dividend hike and the belief that trading revenue may be more sustainable. Mayo also upped his second-quarter earnings forecast, for the second time in a month, to 82 cents a share from 80 cents, and his full-year estimate to $3.35 a share from $3.30. Shares rose 47 cents to $45.85, a new 52-week high.
Intel Corp. (NasdaqNMINTCNews) rose 39 cents to $23.54 as UBS raised its price target on the stock to $29 from $26 ahead of Intel's second quarter earnings, slated for release on July 15.
"While we do not expect Intel to materially beat our $6.7 billion sales estimate for the second quarter, we do believe that the Centrino [wireless chip] results will be strong," the broker said.
In the bond market, Treasurys gained traction as money ebbed out of stocks. The 10-year note rose 5/32 to yield 3.69 percent, down four basis points from 3.73 percent on Tuesday.
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