The bulls may be slowly losing their grip on Wall Street as Dow tumbled 107 points on Tuesday -- capping its worst two-day slide in nearly three months -- amid sinking energy stocks and an ugly day for the retail sector.
Today's Markets
The Dow Jones Industrial Average lost 107.46 points, or 1.25%, to 8504.67, the Standard & Poor's 500 sank 11.75 points, or 1.27%, to 911.97 and the Nasdaq Composite tumbled 20.20 points, or 1.11%, to 1796.18. The consumer-friendly FOX 50 fell 9.42 points, or 1.38%, to 675.39.
Tuesday's triple-digit tumble came in the face of a pair of better-than-expected economic reports that showed an unexpected surge in new home construction and the largest annual decline in producer prices in 60 years. Instead, the markets closed sharply lower as oil's $2 rally evaporated and retailers soured on Best Buy's (BBY) earnings report.
“The disturbing thing is they look a little tired to me. The kind of [economic] news we had this morning… if that happened a week ago, the market would have been up 200 points. I think we’ve run into this wall,” NYSE trader Ted Weisberg of Seaport Securities told FOX Business, pointing to the 9000 level on the Dow as a major point of resistance.
Stocks ended at session lows, with the Dow losing roughly 50 points in the final 10 minutes alone. The index has lost nearly 300 points this week alone -- the worst two-day slide since March 30. The ugly start to the week drags the index back into the red for 2009 and leaves Wall Street's four-week win streak in doubt.
“I think the market is starting to deteriorate here. It really needs to turn course quickly or we could have a healthy correction with the Dow returning to late-May lows,” said Nick Kalivas, director of financial research at MF Global.
Last week the bulls put the finishing touches on a 14-week surge that pushed the Dow up nearly 33% -- the biggest such move since March 1975. But Kalivas said if the benchmark index is unable to hold the 8500 level, it could sink down to 8250.
Nearly all 30 stocks on the Dow ended with losses, led by Bank of America (BAC), General Electric (GE) and Disney (DIS). On the upside, Microsoft (MSFT) and Pfizer (PFE) eked out minor gains.
Energy stocks like ExxonMobil (XOM) and Schlumberger (SLB) dragged the markets lower as crude closed in the red for the third-straight day. After nearly eclipsing $73 per barrel early in the day, crude settled at $70.47, down 15 cents, or 0.21%. Gold held onto its gains, climbing $4.70 per ounce, or 0.51%, to $931.60.
At the same time, retailers like Abercrombie & Fitch (ANF) and J.C. Penney (JCP) sold off following Best Buy's better-than-expected earnings report. While the electronics retailer beat the Street with a 15% decline in net income, it declined to boost its full-year outlook, citing "limited visibility to consumer spending in the back half of the year." The comments helped send Best Buy's shares down nearly 8%.
Meanwhile, Kevin Warsh, a Federal Reserve governor, warned that just because stocks have surged off their lows doesn’t mean the U.S. economy will follow suit. "The panic's hasty retreat should not be confused with robust recovery," said Warsh. “The rather indiscriminate bounce off the bottom -- across virtually all assets and geographies -- may be more indicative of a one-time reset, which may or may not be complete."
Data Dump
Despite recent inflation fears, the Labor Department said Tuesday its produce price index climbed just 0.2% in May, a softer read on inflation than the 0.6% increase expected by economists.In fact, prices were off by 5% from a year ago, the largest annual decline in 60 years. Excluding volatile food and energy costs, prices were down 0.1% from April -- the first decline in nearly three years.
The Commerce Department said housing starts surged by 17% last month from April’s record low -- more than twice as much as economists expected. Single-family housing, a key indicator of demand in the struggling housing market, rose for the third-straight month. Home-building stocks like Centex (CTX) and Lennar (LEN) closed modestly higher.
Corporate Movers
General Motors unveiled plans to unload its unprofitable Saab unit to Swedish boutique auto maker Koenigsegg Group for an undisclosed sum. Separately, CEO Fritz Henderson told The New York Times that GM plans to reduce its executive ranks by 35% from last year.
La-Z-Boy (LZB) surged by almost 20% a day after the furniture maker surprised the Street with an adjusted-profit of 7 cents per share. Analysts had expected an 11-cent loss for the company, which suffered a 23% plunge in revenue.
News Corp.’s (NWS) social-networking site MySpace released plans to slash its staff by 30% to reduce “bloated” staffing levels. Rupert Murdoch’s News Corp. is also the parent of FOX Business.
BlackRock (BLK) said its deal to buy Barclays Global Investors from Barclays (BCS) has been accepted by the British lender and will close in the fourth quarter.
Matrixx Iniatives (MTXX) lost more than two-thirds of its market cap after the FDA told the drug maker to stop selling the intranasal versions of its cold medicine Zicam due to 130 reports of people losing their sense of smell. While Matrixx called the FDA action “unwarranted,” it said it may remove the products from the marketplace.
Genzyme (GENZ) tumbled after the biotech company said it will stop production at a Boston plant after finding a virus there. The halt will impact two of the drug maker’s best-selling drugs.
Sara Lee (SLE) is blocking private-equity firms, including Blackstone Group (BX) and Kohlberg Kravis Roberts, from taking part in the auction of its household and personal-care business, the New York Post reported. Goldman Sachs (GS), the investment bank in the auction, is reportedly requiring suitors to bid for the entire division.
Global Markets
European stocks were mixed following a two-day dive. London's FTSE 100 gained 0.06% to 4328.57, Germany's DAX climbed 0.02% to 4890.72 and France's CAC 40 slid 0.17% to 3213.95.
In Asia, Japan's Nikkei 225 slumped by 2.86% to 9752.88 and Hong Kong's Hang Seng fell 1.8% to 18165.50. China's Shanghai Composite sank 0.48% to 2776.02.
