Stocks suffered a late selloff on Wednesday, ending mixed as another rate cut from the Federal Reserve apparently wasn't enough for Wall Street to post a rare two-day win streak
Today's Market
The Dow Jones Industrial Average lost 74.16 points, or 0.82%, to 8990.96, the broader S&P 500 fell 10.42 points, or 1.11%, to 930.09 and the Nasdaq Composite picked up 7.74 points, or 0.47%, to 1657.21. The consumer-friendly FOX 50 slid 11.69 points, or 1.60%, to 718.35.
The late-day tumble erased gains of more than 300 points on the Dow, sending the benchmark U.S. index back below the 9000 level.The chances of Wall Street's first two-day win streak in more than a month also vanished in the selloff.
The interest rate cut by the Fed was highly anticipated but failed to produce a sustained rally on Wall Street.
"The economic problems that existed yesterday still exist today and will tomorrow," said Kenneth Polcari, managing director at ICAPEquities, who attributed the earlier rally to an oversold market. "There is plenty of money on the sidelines waiting to be invested and moves like this cause people to [try] not to miss the bottom. They won’t -- trust me."
Calls for a bottom grew louder on Tuesday after the Dow surged 889 points -- the second best one-day jump in the index's history. However, Wednesday's late losses could damper that sentiment.
“In our view, valuations have gotten very cheap. We’re in the bottom range. I don’t know if we’ve seen the bottom but we should be bottoming out," said Paul Nolte, director of investments at Hinsdale Associates.
Intel (INTC) and JPMorgan Chase (JPM)led the percentage decliners on the Dow, which ended at session lows. On the other hand, General Motors (GM) and Alcoa (AA) posted the largest percentage advances on the index.
All eyes were on the Fed on Wednesday as the markets largely ignored a $5 jump in crude oil prices, a mixed batch of earnings reports and a surprise jump in durable goods orders.
Stocks were highly volatile before and after the Federal Open Market Committee's unanimous decision to slash the Federal Funds rate by half a percentage point to 1% -- the lowest level since June 2003.
"The pace of economic activity appears to have slowed markedly, owing importantly to a decline in consumer expenditures," the FOMCsaid in a statement. The Fed didn't close the door to the possibility to another interest rate cut despite the historically low current rates.
The rate cut was the latest in a series of emergency actions that began more than a year ago to counter a slowing economy and nearly frozen credit markets.
Market participants argued an interest rate cut was needed to fight an onslaught of ugly economic headlines and market sentiment that has been overwhelmingly gloomy.Then again, inflation hawks and others said the Fed should have held off on cutting interest rates again to save ammo for another potential financial disaster.
Meanwhile, crude oil futures ended sharply higher Wednesday following a mixed inventory report. The price of a barrel of crude rose $4.77 to close at $67.50.The government report showed a lower-than-expected build of 500,000 barrels of crude last week.
The rally marked the largest dollar and percentage gain for crude since September 22.Still, oil prices remain off more than 53% from all-time records of $145 a barrel in July.
A number of major companies reported earnings onWednesday, including better-than-expected profits from Dow components Kraft(KFT) and Proctor & Gamble (PG) as well as disappointing profits from energy company Hess (HES) MGMMirage (MGM).
Corporate Movers
General Motors (GM) and Chrysler LLC cleared major stumbling blocks to a possible merger, however a deal still hinges on government help and financing, Reuters reported. The auto makers reportedly agreed that GM CEO Rick Wagoner would lead the combined company. Also, GMAC LLC, the finance arm owned by GM and Chrysler’s parent, is considering transforming into a bank holding company to access the government's $700 billion bailout funds, The Wall Street Journal reported.
Yahoo! (YHOO) and Time Warner’s (TWX) AOL are engaged in “meaningful” due diligence on a possible deal, though no transaction is imminent, Reuters reported.
Kraft Foods (KFT), the world's largest food processor, more than doubled its third-quarter profit thanks to an asset sale. Excluding one-time items, Kraft earned 45 cents per share, topping expectations by a penny. The company also backed its 2008 and 2009 forecasts.
Procter & Gamble (PG) posted a 9% rise in fiscal first-quarter earnings to $1.03 per share, matching Thomson Reuters expectations. The consumer products maker said revenue jumped 9% to $22 billion. The company also lowered the bottom end of its full-year forecast.
Moody’s (MCO), the credit ratings company, disclosed an 18% decline in third-quarter earnings but managed to top expectations. However, the company cut its outlook for the rest of the year due to challenges in the credit markets.
CVSCaremark (CVS) completed its tender offer to acquire Longs Drug Stores (LDG). The retailer expects the merger to be completed on or about Thursday.
Comcast (CMCSA) fell sharply even though it posted a better-than-expected profit of 24 cents per share in the third quarter. Shares were hurt after Comcast, largest U.S. cable provider, reported a video subscriber decline of 147,000 in the quarter.
Qwest Communications (Q) disclosed an in-line 93% plunge in third-quarter profit and announced plans to cut 1,200 jobs, or 3% of its workforce. The company also said its full-year earnings would be at the lower end of its forecast.
Hess (HES) posted a near-50% jump in profit to $2.37 per share, missing analyst expectations by 6 cents.
Legg Mason (LM) soared 30% after the No. 2. public U.S. asset manager said it lost a wider-than-expected 74 cents per share in the third quarter. The company saw $20 billion of client money pulled during the quarter and wrote down $191.1 million related to bailouts of money-market funds.
Sony (SNE) suffered a 72% dive in quarterly profit thanks to the soaring yen. Sony earned $214 million on a 0.5% decline in sales to $21.4 billion.
Kellogg (K) easily beat the Street with third-quarter earnings of 89 cents per share on a 9% jump in revenue to $3.29 billion. The company also said its full-year profit should be at the high end of its previous forecast.
Data Dump
The Commerce Department said durable goods orders, which measure demand for products designed to last three years or longer, unexpectedly rose 0.8% last month. Amid a slowing economy, economists had expected a decline 1.1%.
Global Markets
European stock markets extended sharp gains from Tuesday, with London’s FTSE 100 closing up 316.16 points, or 8.05%, to 4242.54 and France’s CAC 40 Index jumping 287.65 points, or 9.23%, to 3402.57.
In Asia, Japan’s Nikkei 225 jumped 589.98 points, to 7.74%, to end at 8211.90. The index has surged 14.6% over the past two days. Hong Kong’s Hang Seng Index saw more modest gains, rising 105.78 points, or 0.84%, to 12707.07.
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