Stock Market News for April 28, 2010 - Market News
U.S. stocks dropped sharply on Tuesday as fears that a deepening debt crisis in Europe would stall a global economic recovery overshadowed solid earnings reports and Goldman’s testimony on the Hill. The Dow average plunged more than 200 points as Standard & Poor’s downgraded Greece’s credit rating to below investment grade and cut Portugal’s debt rating by two notches to A-minus.
The sharp selloff came at a time when market participants were gearing up for a pullback given the recent run-up in stock prices. The downgrades gave traders reason to cut their exposure to riskier bets and divert funds to safe-haven instruments like U.S. Treasury bonds.
Among the 30 DJIA components, 28 closed lower on the day, led by declines in Alcoa (NYSE:AA), off 4.3%, and Caterpillar (NYSE:CAT), down 4.4%. Only 3M (NYSE:MMM) managed a gain, helped by its estimate-topping numbers and increased full-year guidance. The wave of selling sent 481 of the S&P 500 stocks lower on the day.
Nevertheless, the growth story appeared firmly in place as big Wall Street names continued to surprise with estimate-beating numbers. Far away from Goldman and Greece, economic posts too pointed towards a strengthening economic recovery.
Even as Goldman’s two top executives testified before the Senate, defending allegations of fraud and wrongdoing, and 3M (NYSE:MMM) and DuPont (NYSE:DD) came out with positive earnings results, the ratings downgrade had traders worrying if Greece was heading towards a financial collapse. Leading European stock indexes dropped by 2.5% to 6% as fears of debt crisis contagion rattled investors. Germany’s unwillingness to help fund Greece’s finances without sufficient austerity measures in place also multiplied traders’ worries.
All three major indexes posted their sharpest declines in more than a month. The Dow Jones industrial average plunged 213.04 points, or about 2%, to 10,991.99. The broader S&P 500-stock index led with a fall of 28.34 points, or 2.34%, to 1,183.71. The Nasdaq composite index lost 51.48 points, or 2.04%, to 2,471.47. On the New York Stock Exchange, a heavy 1.68 billion shares exchanged hands as declining issues far outpaced advancing shares. The market’s fear gauge, the CBOE Vix, jumped 30.6%, reflecting the anxiousness of market participants.
Concerns that the proposed regulatory measures would affect banks’ lending abilities and eat into their profits weighed on financial stocks. Bank of America (NSYE:BAC) dropped 3.2%, Morgan Stanley (NYSE:MS) slid 3.3% and J.P. Morgan Chase (NYSE:JPM) fell 3.4%. Citigroup (NYSE:C) shares fell 5.9% after Monday's news the Treasury is selling up to 1.5 billion of the 7.7 billion it owns. Deutsche Bank (NYSE:DB) and UBS (NYSE:UBS) shares plunged 6.1% and 6.0%, respectively, as investors grew fearful of their exposure to euro nation sovereign debt holdings and sensitivity to regional economies.
All ten S&P industry sectors closed in the red, led by declines in basic material shares (-3.3%) and financials (-3.2%), which were followed by oil and gas (-2.9%), industrials (-2.6%), consumer services (-2.5%), consumer goods (-2.2%), technology (-2.0%), utilities (-1.7%), telecommunications (-1.3%), and health care (-1.1%).
Investor shunned equities and ran to the safety of government-backed debt. The benchmark 10-year Treasury note rose to 99 15/32 and its yield fell to 3.69% from 3.81% late Monday. Gold prices jumped $8.20 to $1,162. The US dollar, up 1.3% against a basket of currencies, rose to a one-year high against the euro. Crude prices, already face to face with an expected increase in today's US weekly inventory report, recorded their sharpest drop since April 16, off $1.76 to $82.44.
The FOMC meet adjourns today. While its minutes address interest rate policy intentions and economic estimates, expectations are "extended period" language to remain unchanged, but recovery prospects may cause some adjustments to discount rates.
Today's earnings include: Comcast (NASDAQ:CMCSA), Dow Chemical (NYSE:DOW), Sprint (NYSE:S), and Corning (NYSE:GLW).
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