Reports of a slowdown in China and concerns that the European debt crisis could spread throughout the continent cast a shadow on Wall Street Tuesday, sending the Dow average to its biggest single-session drop since August.
The fast-paced economic growth in some Asian economies, particularly China, is now forcing investors across the globe on the back foot since they feel the authorities in those nations would raise interest rates to cool economic growth and keep inflation in check. Those worries, coupled with the on-again-off-again European debt problems, have kept investors away from stocks. Citing inflation, South Korea's central bank raised interest rates by 0.25% yesterday.
The Federal Reserve's announcement to pump in another $600 billion into the economy has had little impact on investors' sentiments either as several nations have criticized the move, saying it would result in ‘hot' money flowing into their economies and resulting in asset buildups.
After trading below the 11000 level at one point yesterday, the Dow Jones Industrial Average recouped some of the losses to close at 11023.50, down 178.47 points, or 1.6%. Losses were broad based yesterday, with 28 of the 30 Dow components closing in the red. The Travelers Cos. TRV led the 30-share index lower with a drop of 3.6%. Shares in Alcoa AA fell 2.8% and Monsanto MON closed off 2.4%. Exxon Mobil XOM dropped 2.2%.
The technology-focused Nasdaq Composite index fell almost 44 points, or 1.8%, to 2469.84. The widely followed S&P's 500-stock index fell more than 19 points, or 1.6%, to 1178.37. On the New York Stock Exchange, about six stocks fell in price for every one that advanced.
With stocks losing favor, investors turned to safe-haven assets Tuesday. The price of Treasury bonds rose, sending corresponding yields lower. The yield on the benchmark 10-year note dropped to 2.85% from 2.95% late Monday. Gold prices retreated 2.2%.
Only three of the NASDAQ 100 ended with gains: Urban Outfitters URBN, up 11.9%, Mattel MAT, up 3.3%, and Costco COST, up 0.4%. All ten S&P500 industry sectors closed in the red, with basic material (-2.4%), financials (-2.0%) and oil and gas (-2.0%) shares dropping at least 2%.
Reports that Beijing was considering anti-inflationary measures sent commodity prices lower, with copper dropping 5% Tuesday. Oil prices fell 3% to $82.34.
At home, yesterday's gold star was placed on the GM initial public offering, whose total value could reach $22.8 billion. The size was upped 30% to 478 million shares with the price raised yesterday morning to $32-$33 from $26-$29 previous. The deal will price after the close today and the shares begin trading tomorrow.
Among companies reporting today are fourth quarter results from Applied Materials AMAT, third quarter numbers from Limited Brands LTD, Target TGT and a second quarter post from NetApp NTAP.
ALCOA INC (AA): Free Stock Analysis Report
APPLD MATLS INC (AMAT): Free Stock Analysis Report
COSTCO WHOLE CP (COST): Free Stock Analysis Report
LIMITED INC (LTD): Free Stock Analysis Report
MATTEL INC (MAT): Free Stock Analysis Report
MONSANTO CO-NEW (MON): Free Stock Analysis Report
NETAPP INC (NTAP): Free Stock Analysis Report
TARGET CORP (TGT): Free Stock Analysis Report
TRAVELERS COS (TRV): Free Stock Analysis Report
URBAN OUTFITTER (URBN): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis Report
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