Word of trouble from the country's 10th-largest mortgage lender abruptly pulled the plug on the stock market's attempted recovery, with the Dow wiping out a two-day rally to end Tuesday with a near 150-point loss, and a monthly decline of 1.5%.
Concerns about credit markets and bad-home loans resurfaced with news that American Home Mortgage Investment Corp. might liquidate its assets after failing to meet margin calls. "That again brings up the issue that we don't know how the credit crunch is going to affect financials," said Art Hogan, chief market strategist at Jefferies & Co. The Dow Jones Industrial Average closed 146.3 points lower at 13,212, with 26 of its 30 components taking a hit. "There is not one signal that says the credit markets are okay; there is a tremendous amount of uncertainty, and it is going to take some time for confidence to return to the market," said Mike Malone, a trading analyst at Cowen & Co.
The S&P 500 fell 18.64 points to 1,455.27, giving it a 3.2% drop for the month, while the Nasdaq 100 dropped 37.01 points to 2,546.27, putting it on course for a 2.2% drop for July. "There is also attention being paid to crude oil possibly reaching new highs," said Hogan of Crude-oil futures, which advanced above $78 a barrel, with the September contract closing at $78.21 a barrel.
The Dow had surged more than 120 points in the early going after General Motors Corp. reported a return to profitability. The automaker's stock retained some of its advance, with its stock up 0.74%. But the market shifted course, and American Home Mortgage's stock lost nearly 90% of its value, after the mortgage lender said it had missed margin calls from lenders and had hired advisers to review its options, including liquidating its assets. Another indication of the shaky credit market came from IndyMac Bancorp. Inc. which reported a 57% slide in second-quarter profit from the year-ago period, with the mortgage lender declining to offer a full-year forecast due to the uncertain outlook for the housing and mortgage markets.
Given the market's massive drop last week, it's no surprise that doubt lingers, said Al Goldman, chief market strategist at AG Edwards. "After the emotional shock to the system that we had Thursday and Friday, it would be very unusual to have it go back up and away," he said. Volume hit 1.8 billion shares at the New York Stock Exchange, while 2.4 billion shares were traded at the Nasdaq. Declining stocks beat advancers 9-7 at the NYSE, and by 18-11 on the Nasdaq.
Stocks spent much of Tuesday in recovery mode, extending solid gains from the prior day, in an effort to shake off the stiff losses incurred the week before.
Tuesday's earnings and economic reports mostly offered support, with the Commerce Department reporting core consumer inflation increased 0.1% for the fourth consecutive month in June, pushing the yearly gain in core inflation down to the lowest level in three years.
Other stock-friendly news included the Conference Board's report that consumers were more positive about the economy and their own finances in July than at any time since 9/11.
Business activity in the Chicago region worsened in July, according to a survey of corporate purchasing managers. The Chicago purchasing-managers' index fell to 53.4% from 60.2% in June, with the number below economists' expectations.
Treasury prices climbed, pushing yields lower, after the stock market turned negative. The benchmark 10-year note closed up 7/32 at 97-27/32 with a yield 4.775%.
The dollar traded little changed against other major currencies. In New York trade, the Euro stood at $1.3699, compared with $1.3692 late Monday. Gold futures extended the prior day's gains, boosted by rising oil prices. Gold for August delivery climbed $2.80 to close at $666.90 an ounce.
Tuesday, July 31, 2007
Monday, July 30, 2007
The Bleeding Has Stopped...
Stocks in the U.S. closed firmly higher Monday as traders overcame their early tentativeness and looked for bargains in the wake of last week's selloff.
The major averages alternated between positive and negative territory before going to the upside for good around midday. The Dow Jones Industrial Average rose 92.84 points, or 0.7%, to 13,358.31, and the S&P 500 added 14.96 points, or 1.03%, at 1473.91. The Nasdaq Composite climbed 21.04 points, or 0.82%, to 2583.28.
For the bulls, who watched Thursday and Friday as mounting worries about the credit market crushed stock indices, the ascent was a welcome development. The Dow lost 208.10 points, or 1.54%, to 13,265.47 on the final day of trading last week -- a pullback that followed a decline of more than 300 points the day before. Also last time out, the S&P 500 dropped 23.71 points to 1458.95, and the Nasdaq sank 37.10 points to 2562.24.
The financial sector had a rebound, aiding the rally. After both fell by more than 5% over the previous five sessions, the KBW Bank Index was higher by 1.6% and the Nasdaq Financial Index rose 1.3%.
Many other groups also recovered and closed up. Among the winners, the Philadelphia Gold & Silver Index added 3.3%, the Amex Oil Index was higher by 1.7%, and the Philadelphia Semiconductor Sector Index also rose 1.7%.
About 4.07 billion shares changed hands on the New York Stock Exchange, as advancers topped decliners by a 5-to-3 margin. Volume on the Nasdaq reached 2.36 billion s
In the absence of any economic data, Treasury prices lost ground. The 10-year note was down 10/32 in price, yielding 4.80%, and the 30-year bond lost 18/32, yielding 4.97%.
After finishing a penny shy of its record close during the last session, the September crude contract gave back 19 cents to $76.83 a barrel. Gasoline prices were off by a penny at $2.08 a gallon.
The major averages alternated between positive and negative territory before going to the upside for good around midday. The Dow Jones Industrial Average rose 92.84 points, or 0.7%, to 13,358.31, and the S&P 500 added 14.96 points, or 1.03%, at 1473.91. The Nasdaq Composite climbed 21.04 points, or 0.82%, to 2583.28.
For the bulls, who watched Thursday and Friday as mounting worries about the credit market crushed stock indices, the ascent was a welcome development. The Dow lost 208.10 points, or 1.54%, to 13,265.47 on the final day of trading last week -- a pullback that followed a decline of more than 300 points the day before. Also last time out, the S&P 500 dropped 23.71 points to 1458.95, and the Nasdaq sank 37.10 points to 2562.24.
The financial sector had a rebound, aiding the rally. After both fell by more than 5% over the previous five sessions, the KBW Bank Index was higher by 1.6% and the Nasdaq Financial Index rose 1.3%.
Many other groups also recovered and closed up. Among the winners, the Philadelphia Gold & Silver Index added 3.3%, the Amex Oil Index was higher by 1.7%, and the Philadelphia Semiconductor Sector Index also rose 1.7%.
About 4.07 billion shares changed hands on the New York Stock Exchange, as advancers topped decliners by a 5-to-3 margin. Volume on the Nasdaq reached 2.36 billion s
In the absence of any economic data, Treasury prices lost ground. The 10-year note was down 10/32 in price, yielding 4.80%, and the 30-year bond lost 18/32, yielding 4.97%.
After finishing a penny shy of its record close during the last session, the September crude contract gave back 19 cents to $76.83 a barrel. Gasoline prices were off by a penny at $2.08 a gallon.
Thursday, July 26, 2007
Second-worst day of 2007 Down 311
A tidal wave of worry about housing and credit markets swept over Wall Street Thursday, sending the Dow industrials tumbling 311 points in its second-biggest point loss of the year. The 30-share Dow Jones industrial average was down as much as 449 points earlier in the session before moving off its lows and closing down about 2.3 percent. The Dow sank 416 points on Feb. 27 on worries about slowing global growth.
The broader S&P 500 (down 38.45 to 1,479.64, Charts) tumbled 2.3 percent while the tech-laden Nasdaq (down 64.86 to 2,583.31, Charts) fell 1.8 percent.
Treasury bonds surged as investors sought safety, taking the yield on the 10-year note to 4.77 percent from 4.91 percent late Wednesday. Bond prices and yields move in opposite directions.
Oil jumped briefly above $77 a barrel but then turned lower along with stocks as traders worried that slower economic growth would dent demand for oil. Light crude for September delivery slid 86 cents to $75.02 a barrel on the New York Mercantile Exchange. Elsewhere, the dollar fell against the euro and the yen, and gold fell sharply.
Trading curbs, used to slow down the market in the event of a big move, were imposed by the New York Stock Exchange late this morning.
Credit market fears, which prompted a selloff that dragged the Dow down 226 points Tuesday, again unnerved investors and put pressure on stocks.
More disappointing news from the housing sector also weighed on investors. Homebuilders including D.R. Horton (down $0.75 to $16.73 and Pulte Homes (down $1.20 to $19.55), the nation's No. 2 and No. 3 builders, posted huge losses. And a bigger-than expected drop in new home sales in June added to those woes. The Commerce Department reported new home sales tumbled 6.6 percent.
The two big selloffs this week come just a week after the Dow hit another record, closing above 14,000 for the first time.
Overall, the earnings news investors considered Thursday was mixed. Dow component Exxon Mobil (down $4.97 to $87.82), the nation's largest oil company, posted a decline in quarterly profits, sending its shares 5.5 percent lower.
But embattled automaker Ford Motor (up $0.14 to $8.11) surprised investors reporting an unexpected quarterly profit early Thursday, helped by reduced losses in its North American operations. Ford stock climbed nearly 2 percent in late afternoon trade.
Apple (up $5.52 to $142.78) shares jumped over 5 percent after the company reported results that beat Wall Street's estimates after the market closed Wednesday.
Dow component 3M Co., (down $0.47 to $89.15) known for producing Scotch tape, reported earnings that topped Wall Street estimates. The stock edged higher.
Among individual issues, 29 of the 30 Dow components were lower in afternoon trade.
In other economic news, orders for big-ticket items meant to last three years or more rose less than expected in June.
Jobless claims fell unexpectedly last week, the government reported.
Market breadth was negative on significantly heavier than normal volume. Losers topped winners by more than 10 to 1 on the New York Stock Exchange on volume of 2.41 billion shares. Decliners beat advancers more than 6 to 1 on the Nasdaq on volume of 3.08 billion shares.
The broader S&P 500 (down 38.45 to 1,479.64, Charts) tumbled 2.3 percent while the tech-laden Nasdaq (down 64.86 to 2,583.31, Charts) fell 1.8 percent.
Treasury bonds surged as investors sought safety, taking the yield on the 10-year note to 4.77 percent from 4.91 percent late Wednesday. Bond prices and yields move in opposite directions.
Oil jumped briefly above $77 a barrel but then turned lower along with stocks as traders worried that slower economic growth would dent demand for oil. Light crude for September delivery slid 86 cents to $75.02 a barrel on the New York Mercantile Exchange. Elsewhere, the dollar fell against the euro and the yen, and gold fell sharply.
Trading curbs, used to slow down the market in the event of a big move, were imposed by the New York Stock Exchange late this morning.
Credit market fears, which prompted a selloff that dragged the Dow down 226 points Tuesday, again unnerved investors and put pressure on stocks.
More disappointing news from the housing sector also weighed on investors. Homebuilders including D.R. Horton (down $0.75 to $16.73 and Pulte Homes (down $1.20 to $19.55), the nation's No. 2 and No. 3 builders, posted huge losses. And a bigger-than expected drop in new home sales in June added to those woes. The Commerce Department reported new home sales tumbled 6.6 percent.
The two big selloffs this week come just a week after the Dow hit another record, closing above 14,000 for the first time.
Overall, the earnings news investors considered Thursday was mixed. Dow component Exxon Mobil (down $4.97 to $87.82), the nation's largest oil company, posted a decline in quarterly profits, sending its shares 5.5 percent lower.
But embattled automaker Ford Motor (up $0.14 to $8.11) surprised investors reporting an unexpected quarterly profit early Thursday, helped by reduced losses in its North American operations. Ford stock climbed nearly 2 percent in late afternoon trade.
Apple (up $5.52 to $142.78) shares jumped over 5 percent after the company reported results that beat Wall Street's estimates after the market closed Wednesday.
Dow component 3M Co., (down $0.47 to $89.15) known for producing Scotch tape, reported earnings that topped Wall Street estimates. The stock edged higher.
Among individual issues, 29 of the 30 Dow components were lower in afternoon trade.
In other economic news, orders for big-ticket items meant to last three years or more rose less than expected in June.
Jobless claims fell unexpectedly last week, the government reported.
Market breadth was negative on significantly heavier than normal volume. Losers topped winners by more than 10 to 1 on the New York Stock Exchange on volume of 2.41 billion shares. Decliners beat advancers more than 6 to 1 on the Nasdaq on volume of 3.08 billion shares.
Tuesday, July 24, 2007
Worst Day for Stocks in 4 Months
The selloff that started at the opening bell accelerated into the close today, with the Dow shedding more than 200 points, and the SPX experiencing its biggest one-day selloff since March.
The breadth in the market was horrible today. There were nearly 3000 decliners on the NYSE, more than 93% of the volume was to the downside, and there were also 352 new lows. That is one lopsided day.
Perception is reality in the market. And today, with rumors spreading about the subprime market, scary comments from CFC, and bears like Bill Gross trotting out on CNBC spreading more fear, it doesn't really matter what's behind the comments. The market is in the grips of a selloff.
You can see the rise in fear in the +10% spike in the VIX (back to March levels), the rise in the ARMS Index (1.60), or the surge in the put/call ratio (1.42).
The breadth in the market was horrible today. There were nearly 3000 decliners on the NYSE, more than 93% of the volume was to the downside, and there were also 352 new lows. That is one lopsided day.
Perception is reality in the market. And today, with rumors spreading about the subprime market, scary comments from CFC, and bears like Bill Gross trotting out on CNBC spreading more fear, it doesn't really matter what's behind the comments. The market is in the grips of a selloff.
You can see the rise in fear in the +10% spike in the VIX (back to March levels), the rise in the ARMS Index (1.60), or the surge in the put/call ratio (1.42).
Monday, July 23, 2007
Stocks Up on Merger Monday
Stocks in New York opened the week on a high note, as a string of buyouts and upbeat earnings reports had traders moving to scoop up equities Monday.
The Dow Jones Industrial Average closed with a gain of 92.34 points, or 0.67%, to 13,943.42. The S&P 500 was up 7.47 points, or 0.49%, to 1541.57, and the Nasdaq Composite advanced 2.98 points, or 0.11%, to 2690.58.
Robert Pavlik, chief investment officer with Oaktree Asset Management, said the rebound from Friday's selloff should give investors confidence in the market.
"This earnings reporting season has been very decent, and traders are now hopeful that the negative reports we've had will be the exceptions rather than the norm," he said.
About 3.14 billion shares changed hands on the New York Stock Exchange, as decliners matched advancers. Volume on the Nasdaq reached 2.06 billion shares, with losers outpacing advancers 8 to 7.
Brightening the mood were several mergers, including a mammoth combination that will see oil drillers Transocean and GlobalSantaFe join forces. The combined company will have an enterprise value of $53 billion, and shareholders will receive cash totaling $15 billion. Transocean climbed 5.5% to $115.96, and GlobalSantaFe added 4.8% to $78.33.
Another deal had Cerberus, a private-equity firm, setting plans to acquire United Rentals for $2.83 billion, and Barclays has raised its bid for ABN Amro to more than $93 billion.
At the same time, the Nasdaq dropped 32.44 points, or 1.19%, at 2687.60. All three major averages were lower for the week.
In the absence of any economic data, Treasury prices were little changed. The 10-year note was down 3/32 in price, yielding 4.97%, and the 30-year bond was off 5/32, yielding 5.07%.
Meanwhile, the September crude contract traded as the front-month benchmark for the first time. Oil dropped 90 cents to close at $74.89 a barrel, and gasoline prices were lower by 6 cents at $2.10 a gallon.
Overseas, markets were mostly higher. London's FTSE added 0.6%, while Frankfurt's DAX was up 0.9%. In Asia, Tokyo's Nikkei slid 1.1%, but Hong Kong's Hang Seng was better by 0.3%.
The Dow Jones Industrial Average closed with a gain of 92.34 points, or 0.67%, to 13,943.42. The S&P 500 was up 7.47 points, or 0.49%, to 1541.57, and the Nasdaq Composite advanced 2.98 points, or 0.11%, to 2690.58.
Robert Pavlik, chief investment officer with Oaktree Asset Management, said the rebound from Friday's selloff should give investors confidence in the market.
"This earnings reporting season has been very decent, and traders are now hopeful that the negative reports we've had will be the exceptions rather than the norm," he said.
About 3.14 billion shares changed hands on the New York Stock Exchange, as decliners matched advancers. Volume on the Nasdaq reached 2.06 billion shares, with losers outpacing advancers 8 to 7.
Brightening the mood were several mergers, including a mammoth combination that will see oil drillers Transocean and GlobalSantaFe join forces. The combined company will have an enterprise value of $53 billion, and shareholders will receive cash totaling $15 billion. Transocean climbed 5.5% to $115.96, and GlobalSantaFe added 4.8% to $78.33.
Another deal had Cerberus, a private-equity firm, setting plans to acquire United Rentals for $2.83 billion, and Barclays has raised its bid for ABN Amro to more than $93 billion.
At the same time, the Nasdaq dropped 32.44 points, or 1.19%, at 2687.60. All three major averages were lower for the week.
In the absence of any economic data, Treasury prices were little changed. The 10-year note was down 3/32 in price, yielding 4.97%, and the 30-year bond was off 5/32, yielding 5.07%.
Meanwhile, the September crude contract traded as the front-month benchmark for the first time. Oil dropped 90 cents to close at $74.89 a barrel, and gasoline prices were lower by 6 cents at $2.10 a gallon.
Overseas, markets were mostly higher. London's FTSE added 0.6%, while Frankfurt's DAX was up 0.9%. In Asia, Tokyo's Nikkei slid 1.1%, but Hong Kong's Hang Seng was better by 0.3%.
Monday Morning Outlook
After last week's drubbing, stocks are getting a nice bounce in early trading. A lack of any bad economic news coupled with more M&A activity is luring buyers back into the market.
On the earnings front, both Merck (MRK) and Schering-Plough (SGP) reported strong results. That is lifting the drug sector. In M&A news, the big merger in the oil patch is Transocean (RIG) and GlobalSantaFe (GSF). Also, URI is being taken private for $6.6 billion, and there is a rumor that Tellabls (TLAB) could be taken out.
Oil prices are plunging more than a buck, pushing crude prices back down below $75. Bond yields are also steady, witht the 10-year around 4.95%. These two factors should help support equities.
Asian markets were mixed overnight, with China and India up, but Japan and Australia lower.
The pressure on the financial sector is not going to go away overnight, even though it has temporarily been forgotten by investors this morning.
On the earnings front, both Merck (MRK) and Schering-Plough (SGP) reported strong results. That is lifting the drug sector. In M&A news, the big merger in the oil patch is Transocean (RIG) and GlobalSantaFe (GSF). Also, URI is being taken private for $6.6 billion, and there is a rumor that Tellabls (TLAB) could be taken out.
Oil prices are plunging more than a buck, pushing crude prices back down below $75. Bond yields are also steady, witht the 10-year around 4.95%. These two factors should help support equities.
Asian markets were mixed overnight, with China and India up, but Japan and Australia lower.
The pressure on the financial sector is not going to go away overnight, even though it has temporarily been forgotten by investors this morning.
Sunday, July 22, 2007
Harrington wins British Open
Padraig Harrington of Ireland won the 136th British Open at Carnoustie on Sunday, defeating Sergio Garcia of Spain in a four-hole playoff.
The Week in Review
The major averages finished the week lower, as investors digested some disappointing earnings results and ongoing concerns about the economy and the health of the sub-prime mortgage lending, following the market's recent strong gains.
Corporate financials took center stage in the past week, with second quarter earnings season now in full swing.
Overall, the reports have been moderately good, but not outstanding, with large multinational companies faring the best because of foreign exposure as well as substantial share buybacks.
Twelve Dow components highlighted the lengthy earnings calendar, which also included reports from other luminaries such as Yahoo! (YHOO), eBay (EBAY), Google (GOOG), Abbott Laboratories (ABT), Harley-Davidson (HOG), and Southwest Airlines (LUV).
Also reporting during the week were a host of financial companies, including KeyCorp (KEY), Merrill Lynch (MER), JPMorgan Chase (JPM), Washington Mutual (WM), Citigroup (C), Bank of America (BAC), and Wachovia (WB). Despite some better than expected results, however, lingering concerns about sub-prime lending held the sector back.
Both the Dow Jones Industrial average and the broader S&P 500 index closed at record levels on Thursday, led by strong gains in the Technology sector. Strength in the semiconductor sub-group, in particular, was weakened by a disappointing report from Intel (INTC) mid week, but reinvigorated by IBM (IBM), which posted better than expected results, to lead the sector.
The markets reversed course on Friday, however, as lackluster results from blue chips Caterpillar (CAT) and Google unnerved investors. An inline report from Microsoft (MSFT), following several strong quarters that exceeded analysts' estimates, also weighed on sentiment and prompted shares to retrace their gains.
The flurry of earnings news during the week was also accompanied by Fed Chairman Ben Bernake's semiannual report to Congress, in which he warned that weakness in the housing market could hurt economic growth. Ongoing concerns about the housing market and the health of sub-prime loans has been a major concern in recent weeks, and continues to act as a headwind for the market.
In terms of economic data, the June core PPI rose 3%, according to a report from the Labor Department. That was slightly higher than the 0.2% gain economists were expecting, and raised some inflationary concerns. The core CPI was up 0.2% last month, in line with expectations.
Meanwhile, Housing Starts rose last month, but Building Permits tumbled. June Housing Starts were reported at a 1.467 million annual rate, just above the 1.450 million rate that was expected. Housing permits plunged 7.5% in June to just a 1.406 million annual rate, versus the consensus estimate of a 1.490 million rate, reflecting the bleak outlook for the housing market.
Corporate financials took center stage in the past week, with second quarter earnings season now in full swing.
Overall, the reports have been moderately good, but not outstanding, with large multinational companies faring the best because of foreign exposure as well as substantial share buybacks.
Twelve Dow components highlighted the lengthy earnings calendar, which also included reports from other luminaries such as Yahoo! (YHOO), eBay (EBAY), Google (GOOG), Abbott Laboratories (ABT), Harley-Davidson (HOG), and Southwest Airlines (LUV).
Also reporting during the week were a host of financial companies, including KeyCorp (KEY), Merrill Lynch (MER), JPMorgan Chase (JPM), Washington Mutual (WM), Citigroup (C), Bank of America (BAC), and Wachovia (WB). Despite some better than expected results, however, lingering concerns about sub-prime lending held the sector back.
Both the Dow Jones Industrial average and the broader S&P 500 index closed at record levels on Thursday, led by strong gains in the Technology sector. Strength in the semiconductor sub-group, in particular, was weakened by a disappointing report from Intel (INTC) mid week, but reinvigorated by IBM (IBM), which posted better than expected results, to lead the sector.
The markets reversed course on Friday, however, as lackluster results from blue chips Caterpillar (CAT) and Google unnerved investors. An inline report from Microsoft (MSFT), following several strong quarters that exceeded analysts' estimates, also weighed on sentiment and prompted shares to retrace their gains.
The flurry of earnings news during the week was also accompanied by Fed Chairman Ben Bernake's semiannual report to Congress, in which he warned that weakness in the housing market could hurt economic growth. Ongoing concerns about the housing market and the health of sub-prime loans has been a major concern in recent weeks, and continues to act as a headwind for the market.
In terms of economic data, the June core PPI rose 3%, according to a report from the Labor Department. That was slightly higher than the 0.2% gain economists were expecting, and raised some inflationary concerns. The core CPI was up 0.2% last month, in line with expectations.
Meanwhile, Housing Starts rose last month, but Building Permits tumbled. June Housing Starts were reported at a 1.467 million annual rate, just above the 1.450 million rate that was expected. Housing permits plunged 7.5% in June to just a 1.406 million annual rate, versus the consensus estimate of a 1.490 million rate, reflecting the bleak outlook for the housing market.
Friday, July 20, 2007
Dow Sinks 149 To End Week
The Dow lost about 150 points Friday, a day after closing above 14,000 for the first time ever, as a spate of weak earnings news and continued housing fears rattled markets. The Dow sank over 1 percent, according to early tallies. The broader S&P 500 and the tech-heavy Nasdaq each fell about 1.2 percent. The dollar hit a all-time low against the euro, bonds jumped and oil fell.
Stocks had rallied Thursday, pushing the Dow, a blue-chip barometer that tracks 30 large companies, to its highest finish ever. But a big miss from Dow component Caterpillar dashed hopes of another record setting day Friday. The heavy equipment maker said its net profit fell 21 percent and posted earnings of $1.24 a share, versus estimates for $1.49 a share. Caterpillar (down $4.38 to $82.60) shares slid over 5 percent, although they were down over 9 percent earlier in the session.
Lackluster earnings in the tech sector also weighed on stocks. Google (down $28.66 to $519.93) reported earnings late Thursday that missed Wall Street's estimates even as its quarterly sales soared. The earnings miss - only the second since the Internet search firm went public in 2004 - rattled investors who have grown accustomed to solid results from the company. Google shares tumbled 5 percent.
Swedish firm Ericsson, the biggest maker of cell phone network equipment, also reported earnings that fell short of analysts' expectations early Friday. Ericsson (down $2.37 to $39.72) shares fell 5 percent.
"Google and Caterpillar have really taken the wind out of the sails," said Todd Clark, Director of stock trading at Nollenberger Capital Partners in San Francisco. "But this is just some healthy consolidation. The market really looked a little long in the tooth yesterday."
"Earnings are partly a factor, but they are not the whole thing," said Larry Peruzzi, a stock trader at The Boston Company Asset Management.
Peruzzi said the fact that the Dow hit the 14,000 mark Thursday, but just barely, was also giving investors pause.
"As the market gets up there, it acts as a reflection point," he said, noting that the Dow has often dropped after hitting other psychologically important benchmarks like 12,000 or 13,000.
He also said from comments Federal Reserve member William Poole that the subprime mortgage sector was large enough to affect the broader housing market dampened the mood. Defaults on mortgages in the subprime sector have risen sharply in the last few months, resulting in the implosion of several subprime mortgage lenders and funds that bought the repackaged debt. Poole's comments follow those from Fed Chairman Ben Bernanke, who earlier this week told lawmakers that subprime losers could total $100 billion. While so far limited, Bernanke said a housing slowdown had the potential to cut into consumer spending, hurting the broader economy. His comments helped stocks close lower Wednesday.
The Dow has set a record close in five out of the last six sessions. Thursday investors said upbeat earnings from companies such as IBM, Honeywell International and Bank of America helped lift the benchmark index.
But the stock market rally belies fears about the wider economy. In the first quarter of 2007 the economy grew by just 0.7 percent, well below normal.
And on Friday the dollar hit a record low against the euro and declined verses the yen on fears weakness in the U.S. housing sector could crimp consumer spending, further weakening economic growth.
Treasury prices rose as money poured out of stocks and into safer government debt. The yield on the benchmark 10-year note fell to 4.95 percent from 5.01 percent late Thursday. Bond prices and yields move in opposite directions.
Overseas, major Asian markets finished the session higher on Wall Street's record day Thursday. European stocks started the day higher but finished in the red as the earnings news rolled in.
Oil prices fell, with U.S. light crude for August delivery down 35 cents to close at $75.57 a barrel on the New York mercantile Exchange. Oil is near its all-time trading high of $78.40 hit last July.
Market breadth was negative. Losers beat winners by more than 3 to 1 on volume of 1.64 billion shares on the New York Stock Exchange. On the Nasdaq, decliners topped advancers by over 3 to 1 on volume of 2 billion shares.
COMEX gold for August gained $6.60 to settle at $684.70.
Stocks had rallied Thursday, pushing the Dow, a blue-chip barometer that tracks 30 large companies, to its highest finish ever. But a big miss from Dow component Caterpillar dashed hopes of another record setting day Friday. The heavy equipment maker said its net profit fell 21 percent and posted earnings of $1.24 a share, versus estimates for $1.49 a share. Caterpillar (down $4.38 to $82.60) shares slid over 5 percent, although they were down over 9 percent earlier in the session.
Lackluster earnings in the tech sector also weighed on stocks. Google (down $28.66 to $519.93) reported earnings late Thursday that missed Wall Street's estimates even as its quarterly sales soared. The earnings miss - only the second since the Internet search firm went public in 2004 - rattled investors who have grown accustomed to solid results from the company. Google shares tumbled 5 percent.
Swedish firm Ericsson, the biggest maker of cell phone network equipment, also reported earnings that fell short of analysts' expectations early Friday. Ericsson (down $2.37 to $39.72) shares fell 5 percent.
"Google and Caterpillar have really taken the wind out of the sails," said Todd Clark, Director of stock trading at Nollenberger Capital Partners in San Francisco. "But this is just some healthy consolidation. The market really looked a little long in the tooth yesterday."
"Earnings are partly a factor, but they are not the whole thing," said Larry Peruzzi, a stock trader at The Boston Company Asset Management.
Peruzzi said the fact that the Dow hit the 14,000 mark Thursday, but just barely, was also giving investors pause.
"As the market gets up there, it acts as a reflection point," he said, noting that the Dow has often dropped after hitting other psychologically important benchmarks like 12,000 or 13,000.
He also said from comments Federal Reserve member William Poole that the subprime mortgage sector was large enough to affect the broader housing market dampened the mood. Defaults on mortgages in the subprime sector have risen sharply in the last few months, resulting in the implosion of several subprime mortgage lenders and funds that bought the repackaged debt. Poole's comments follow those from Fed Chairman Ben Bernanke, who earlier this week told lawmakers that subprime losers could total $100 billion. While so far limited, Bernanke said a housing slowdown had the potential to cut into consumer spending, hurting the broader economy. His comments helped stocks close lower Wednesday.
The Dow has set a record close in five out of the last six sessions. Thursday investors said upbeat earnings from companies such as IBM, Honeywell International and Bank of America helped lift the benchmark index.
But the stock market rally belies fears about the wider economy. In the first quarter of 2007 the economy grew by just 0.7 percent, well below normal.
And on Friday the dollar hit a record low against the euro and declined verses the yen on fears weakness in the U.S. housing sector could crimp consumer spending, further weakening economic growth.
Treasury prices rose as money poured out of stocks and into safer government debt. The yield on the benchmark 10-year note fell to 4.95 percent from 5.01 percent late Thursday. Bond prices and yields move in opposite directions.
Overseas, major Asian markets finished the session higher on Wall Street's record day Thursday. European stocks started the day higher but finished in the red as the earnings news rolled in.
Oil prices fell, with U.S. light crude for August delivery down 35 cents to close at $75.57 a barrel on the New York mercantile Exchange. Oil is near its all-time trading high of $78.40 hit last July.
Market breadth was negative. Losers beat winners by more than 3 to 1 on volume of 1.64 billion shares on the New York Stock Exchange. On the Nasdaq, decliners topped advancers by over 3 to 1 on volume of 2 billion shares.
COMEX gold for August gained $6.60 to settle at $684.70.
Thursday, July 19, 2007
Dow Above 14,000
Wall Street logged another historic milestone Thursday as the Dow finished above 14,000 for the first time ever, helped by positive corporate earnings while investors kept a close eye on the Federal Reserve's outlook on the economy.
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