Oct 19, 2012
Wall Street at Close Report | MarketWatch -October 19, 2012-: U.S. stocks slammed on worst day since June :
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) — U.S. stocks fell sharply Friday, with the major indexes suffering their worst single-day drop since June, after disappointing earnings from heavy hitters, particularly in the tech sector.
“We’ve had some household names disappointing on revenue, earnings or guidance. We had about 80 companies reporting this week: financials that did better and technology that did worse,” said Art Hogan, market strategist at Lazard Capital Markets LLC in New York.
“Since this is the worst day we’ve had in months, it reminds us that we haven’t had much volatility or downward pressure since the bottom in June,” Hogan added.
The Nasdaq Composite COMP -2.19% declined 67.25 points, or 2.2%, to 3,005.62, with Friday’s slide pushing the index into negative turf for a second consecutive week, the most recent one down 1.3%. Weighing on the Nasdaq, shares of Apple Inc. AAPL -3.60% dropped 3.6%. Read: Tech selloff takes down Apple, Microsoft.
Next week about 140 S&P 500 SPX -1.66% companies are scheduled to report, with the coming earnings to include companies from a broader range of sectors, including consumer, energy and industrials. If those sectors follow in technology’s wake, there would be more reason for concern, Hogan said.
Retaining a weekly rise of 0.3%, the S&P 500 index dropped 24.15 points, or 1.7%, to 1,433.19, with consumer discretionary taking the biggest hit of its 10 major industry groups.
The Dow Jones Industrial Average DJIA -1.52% slumped 205.43 points, or 1.5%, to 13,343.51, shaving its gain for the week to 0.1%.
McDonald’s Corp. MCD -4.46% paced blue-chip losses that included all but one of its 30 components. The fast-food chain’s shares sank 4.5% after it missed consensus estimates for the third quarter.
“The earnings season is not great right now, but the fundamentals haven’t changed; the U.S. economy is still improving, and it hasn’t gotten worse in Asia or Europe,” said David Kelly, chief market strategist at J.P. Morgan Funds. After a strong run, “the market is taking a pause,” Kelly said.
Also weighing on the Dow, Microsoft Corp. MSFT -2.90% fell 2.9% after the software maker reported earnings beneath Wall Street’s expectations, and General Electric Co. GE -3.42% retreated 3.4% after its third-quarter revenue came in short of forecasts. Read: GE net rises on higher industrial revenue.
Wall Street’s focus is where it should be, on corporate earnings, which are “starting to slow down as expected in a typical third quarter,” said Chip Cobb, senior vice president at BMT Asset Management in Bryn Mawr, Penn. “It’s mildly disappointing because you want every quarter to be better than the last,” Cobb added.
Off the Dow, Honeywell International Inc.’s HON +1.74% shares rose 1.7% after the diversified manufacturer cut its 2012 sales forecast but reported quarterly income that beat forecasts.
For every stock rising, more than three fell on the New York Stock Exchange, where almost 946 million shares traded. Composite volume neared 3.9 billion.
Oil and gold prices also fell, with crude futures CLX2 -2.13% off $2.05 at $90.05 a barrel and gold futures GCZ2 -1.32% losing $20.70 to $1,724 an ounce.
The dollar DXY +0.35% gained against other global currencies, including the euro EURUSD +0.0087% , while Treasury yields fell, with the benchmark 10-year note 10_YEAR -0.17% used in figuring the rate of home mortgages and other consumer loans down to 1.770%.
A trade group reported Friday that sales of existing homes declined 1.7% in September from a 7.8% rise the prior month. The data from the National Association of Realtors was in line with expectations, but as with Thursday, economic reports and events in Europe both took a back seat to corporate results. Read: Sales of existing homes drop in September.
“Home sales did fall, but the supply of homes also fell, and if you look at the inventory of new and existing homes combined, there are 2.4 million total homes for sale in the U.S., the lowest since July 2002,” said Kelly.
Homes for sale “peaked at 4.4 million in July of 2007, so we’re 2 million lower than just after the peak of the housing bubble,” said Kelly, who noted the lower supply should drive prices up, increase housing starts as well as household net worth, and lead to more confidence and bank lending.
The heads of the 17-nation euro zone on Friday agreed to continue their pursuit of a banking supervisor. Read: Investor fears of euro-zone catastrophe fading.
“The fact they for the most part have continued to give us moderately positive guidance has allowed us to focus attention on back here. Unless we have Spain or France saying ‘hey, we’re not going to play,’ then it’s a concern,” said Cobb, of the ongoing efforts to keep the borrowing costs of both nations under control in order to keep them in the euro zone.
Friday’s sharp retreat comes 25 years after the worst single-session stock drop in history, with the Dow losing 23% of its value on Oct. 19, 1987. Read: 10 lessons from the market crash of 1987.
Stocks on Thursday fell for the first session this week after Google Inc.’s GOOG -1.90% third-quarter earnings came in below expectations.
Kate Gibson is a reporter for MarketWatch, based in New York.
Business in Vancouver | BIV Today's Business News -October 19, 2012-: Multimillion-dollar BC Place roof trial scheduled for one year’s time
Economy and Finance
Education and Research
Mining and Energy
October 19, 2012
By PETER JOSEPH
What would it really mean to have a man with Mitt Romney's experience at Bain Capital in the White House?
By TIMOTHY EGAN
The real Romney, the one who seems to have no idea what it's like to be middle-class and struggling, is back.
By BENJAMIN HALL
All the chaos in Syria would seem to bolster the argument for Western intervention. But the rebel brigades are often at cross purposes, creating a dangerous quagmire.
The presidential candidates remain evasive about the need for effective and sane gun control laws.
An appeals court ruling against the discriminatory 1996 law should help hasten its demise.
A study has repudiated the preposterous argument that vaccinating girls might encourage promiscuity.
The new ethics law should not be undermined by lobbying organizations that don't want to identify their major contributors.
Read the full opinion report, including editorials, columns, op-eds and Opinionator. Go to the Section »
By ANDREW ROSENTHAL
The story of the couple behind the lawsuit illustrates why DOMA is not just unconstitutional, but muttonheaded.
Frank Bruni's Blog
The face of the campaign for same-sex marriage in Maine isn't one you'd expect.
By ROSS DOUTHAT
Notes on a debate "gaffe" that wasn't.
The Conscience of a Liberal
By PAUL KRUGMAN
A slower recovery because we didn't screw up as badly.
European Markets at Close Report | MarketWatch -October 19, 2012-: Banks lead Europe stocks lower amid earnings woes
By Sara Sjolin, MarketWatch
LONDON (MarketWatch)—European stock markets dropped on Friday, as investors digested the latest round of earnings on both sides of the Atlantic and looked to developments in the euro zone after a two-day regional summit.
The Stoxx Europe 600 index XX:SXXP -0.76% fell 0.8% to close at 274.08, after reaching the highest level since June 2011 the prior day. On the week, the index closed 1.7% higher.
“People have been reassessing where there’s value in the market. When looking at European equities, you find fairly good companies that have been marked down in the past, but give good dividend yields. And now things are not as bad with the [European Central Bank] and [European Union] making progress,” said Frances Hudson, global thematic strategist at Standard Life Investments.
She said, however, that Friday lacked positive triggers from the euro zone to drive markets higher, with investors instead digesting earnings out of the U.S. so far, including disappointing results from Google Inc. GOOG -2.86% Microsoft Corp. MSFT -2.67% and General Electric Co. GE -2.72% .
“Earnings have in general been weaker than in the previous earnings season and we’re seeing weaker performance on revenue. You may have 61% [in the S&P 500 index] beating on earnings, but only 42% beating on revenue, telling us that what’s happening today is having an impact—we know trade between various countries hasn’t been as positive as it used to be,” she said.
Lackluster earnings reports also drove shares lower in Europe, with Aggreko PLC UK:AGK -7.17% surrendering 7.2% in London. The company said exchange-rate movements and increased bad-debt provisions likely will hurt full-year profit by 2.5%. See: Aggreko: Forex, provisions to affect FY profit
But Carrefour SA FR:CA +5.85% surged 5.9%, after the French food retailer said late Thursday it will sell its Colombian unit for 2 billion euros ($2.61 billion). See: Carrefour to sell Colombia ops to Cencosud at €2B
Developments in Brussels were in investors’ spotlight, as leaders concluded a two-day European Union summit.
Leaders agreed to a deadline of Jan. 1 to agree on a legislative framework for a single supervisory mechanism. See: Euro area sets supervisory legislation deadline
The leaders further said Greece has made good progress with implementing much-needed austerity measures, which could pave the way for the next tranche of bailout money. See: Euro area heads say Greece has made good progress
“The situation in Europe is still at a critical juncture, and even with the introduction on the banking supervision, much work has yet to be concluded,” Atif Latif, director of trading at Guardian Stockbrokers, said in emailed comments.
“Namely of concern is the ability to manage debt sustainability, the fiscal gap. Greece is trying to implement measures; on paper it seems doable but in reality many obstacles are ahead,” he added.
No news about Spain’s progress toward officially asking for a bailout came out of the meeting, putting some pressure on Spanish shares. The IBEX 35 index XX:IBEX -2.31% slumped 2.3% to 7,913.40, with Banco Popular Español SA ES:POP -5.27% lost 5.3% and Banco Santander SA ES:SAN -3.00% SAN -2.94% dropped 3%.
In the U.S., sales of existing home sales declined 1.7% in September to 4.75 million, falling short of economists’ expectations of a rate of 4.8 million. See: Sales of existing homes decline 1.7% in September
U.S. stocks traded lower on Wall Street. See: U.S. stocks drop on earnings news
Europe banks lag, Burberry up
Risk-sensitive sectors, such as banks, drove losses across European bourses.
n Frankfurt, Deutsche Bank AG DE:DBK -3.13% DB -3.62% lost 3.7%, while Commerzbank AG DE:CBK -4.54% dropped 5.3%.
The DAX 30 index DX:DAX -0.76% fell 0.8% to 7,380.64, but closed the week 2.1% higher.
In London, shares of Barclays PLC UK:BARC -2.85% BCS -3.75% gave up 2.9%, while Lloyds Banking Group PLC UK:LLOY -3.30% LYG -4.48% dropped 3.3%, after J.P. Morgan Cazenove downgraded its rating to underweight from neutral, and Royal Bank of Scotland Group PLC UK:RBS -2.09% RBS -2.08% lost 2.1%.
Burberry Group PLC UK:BRBY +0.68% BURBY +0.15% bucked the trend, its shares adding 0.7%, as Investec Securities raised its rating on the luxury-goods firm to buy from hold.
The FTSE 100 index UK:UKX -0.35% closed 0.4% lower at 5,896.15. On a weekly the basis, the index added 1.8%.
And in Paris, Société Générale SA FR:GLE -2.52% fell 2.5% and Credit Agricole SA FR:ACA -2.20% shed 2.2%.
Also lower, shares of Air Liquide SA FR:AI -2.51% gave up 2.5% as Société Générale lowered its rating on the industrial gas firm to hold from buy.
STMicroelectronics NV FR:STM -3.52% lost 3.5%, weighed by the disappointments from Google and Microsoft.
The CAC 40 index FR:PX1 -0.87% eased 0.9% to 3,504.56, but was up 3.4% on the week
Sara Sjolin is a MarketWatch reporter, based in London.
|ADVFN III||Evening Euro Markets Bulletin|
Friday, 19 October 2012