The Federal Reserve’s dour economic outlook cast a negative spell on the markets yesterday, sending indexes off at least 2% and shaking investors’ confidence further. The Fed’s promise to take steps to cure the ills of the economy underscored its concerns about the recovery and, therefore, did little to boost sentiments. Blue-chip stocks had their worst day in a month.
As had been expected, stocks opened the session deep in the red and the declines precipitated as bad news continued to pour in. A Commerce Department report that said trade deficit widened more than expected in June as exports continued to dip, and data showing slower industrial growth in China further worried investors.
The Dow Jones industrial average plunged 265 points, or 2.5%, to 10,378.83, its largest drop since June 29 when it had dropped 268 points. The broader S&P 500 index dropped 31 points, or 2.8%, to 1,089.47, falling below the key technical level of 1,100. The Nasdaq composite led on the downside with a 68-point, or 3%, drop.
The decline was broad based yesterday with all DJIA components ending in the red and none of the S&P 500 sectors managing a gain. The decline on the DJIA was led by Alcoa AA, which fell 6.1%. Shares in Boeing BA fell 4.4% and Caterpillar CAT dropped 3.8%.
Recovery fears sent crude prices below the $80 mark. An Energy Information Agency weekly stockpile report showed gasoline and distillate fuel supplies increased more than expected. Meanwhile, the International Energy Agency predicted a drop in 2011 oil demand, noting, "significant risks that the global recovery will falter."
Safe-haven assets yet again were in demand. The demand for US treasuries sent the benchmark 10-year notes up 23/32, as its yield dropped to 2.687%. The US dollar gained 1.7% against a basket of currencies, with gold prices rising $1.20 to $1,199.20.
Macy's M shares, however, bucked the trend, rising 5.9%. The firm posted better-than-expected second quarter results and raised its 2010 earnings guidance. However, Cisco Systems’ CSCO after-the-close results seemed to outdo Macy’s numbers as the firm’s quarterly revenue came in below analysts’ expectations. Its shares dropped 8% in afterhours trading. Cisco’s earnings are likely to weigh on sentiments today. Cisco said it is "seeing a large number of mixed signals in both the market and from our customers' expectations, and we think the words "unusual uncertainty" is an accurate description of what is occurring."
Today, results are due from Nvidia NVDA, Kohl's KSS, Estee Lauder EL, and Sara Lee SLE.
ALCOA INC (AA): Free Stock Analysis Report
BOEING CO (BA): Free Stock Analysis Report
CATERPILLAR INC (CAT): Free Stock Analysis Report
CISCO SYSTEMS (CSCO): Free Stock Analysis Report
ESTEE LAUDER (EL): Free Stock Analysis Report
KOHLS CORP (KSS): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
NVIDIA CORP (NVDA): Free Stock Analysis Report
SARA LEE (SLE): Free Stock Analysis Report
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