Stock Market News for May 14, 2010 - Market News

Stocks tumbled in the final hours of trading Thursday as cautious comments from Cisco CEO John Chambers and department store operator Kohl’s Corp.’s unimpressive outlook gave investors reason to pull money out of the market.  Absence of market-moving catalysts also weighed on sentiments even as European debt worries showed signs of easing.

John Chambers’ comments that he was “closely watching" developments in Europe indicated revenue risks to US companies from weak European markets.  Despite Cisco’s CSCO better-than-estimated results and raised profit outlook, shares in the company dropped 4.5% and were the leading decliners on the DJIA.  Cisco gets 20% of its revenues from European markets.  However, this morning Chambers tried to downplay his remarks, noting his comments were “over interpreted."

After Wednesday’s rally that was driven by technology shares, Thursday saw a number of big retailers posting disappointing earnings reports.  Shares in Kohl’s KSS dropped 5.6% after the company’s second-quarter and full-year outlook failed to meet Street expectations.  Urban Outfitters’ URBN expenses grew larger than expected, sending its shares down 6.7%.  Macy’s M closed off almost 5% and Target TGT fell 3.6%.  Whole Foods WFMI, however, posted a 91% jump in quarterly earnings on strong same-store-sales growth.

The Dow Jones industrial average dropped 114 points, or 1% and the broader S&P 500 index fell 14 points, or 1.2%.  The technology-dominated Nasdaq led the indexes’ drop with a 30 points, or 1.3%, fall.  On the New York Stock Exchange, declining shares beat those that advanced in price by three to two on volume of 1.21 billion shares. 

The financial sector fell 1.5% Thursday on growing evidence of prosecutorial investigations into majors' double-dealing in the mortgage bond markets. According to reports the NY Attorney General Office probe includes Goldman Sachs GS, Morgan Stanley MS, UBS UBS, Citigroup C, Deutsche Bank DB, Credit Agricole ACA and Merrill/Bank of America BAC.

Safe-havens were in demand once again. The benchmark 10-year US Treasury bonds rose 11/32 in price, with its yield down to 3.537%.  However, gold prices dropped on profit taking as prices fell $13.90 to $1,229.20.  Demand concerns and higher inventories sent crude prices off 1.7% to a three-month low of $74.40.  The US dollar rose against the euro.

Today Pimco CEO El-Erian cautioned, "What is happening in Europe is a vivid illustration of an underlying theme of the new normal... [There are] structural forces overwhelming traditional cyclical ones."