Led by tumbling energy stocks, the Dow tumbled more than 100 points Wednesday afternoon, threatening to put an end to Wall Street's four-day hot streak
Today’s Markets
As of 2:25 p.m. EDT, the Dow Jones Industrial Average fell 122.34 points, or 1.4%, to 8618.29, the Standard & Poor's 500 dropped 18.73 points, or 1.98%, to 926.01 and the Nasdaq Composite lost 25.53 points, or 1.39%, to 1811.26. The consumer-friendly FOX 50 tumbled 9.07 points, or 1.31%, to 681.04.
At the same time, the markets were digesting a better-than-expected ADP Employment report and new testimony from Ben Bernanke, chairman of the Federal Reserve.
The selloff on Wall Street comes as the Dow has soared more than 400 points over the past four sessions amid new evidence the economy is slowly healing. In recent days the S&P 500 and Nasdaq Composite have hit 2009 highs and the Dow nearly closed in the green year-to-date.
“We had a big consolidation in May. We broke up at the turn of the month of May. Now we’re going into a retest of that breakout. Then I think we’re going to go higher,” said Nick Kalivas, vice president of financial research at MF Global. “I would be more alarmed if the Dow breaks through 8500. That would be a sign there are some serious problems technically.”
NSYE trader Doreen Mogavero told FOX Business, "“People have been expecting a pullback and everyday we get fooled."
Almost all 30 components of the Dow were stuck in reverse, led by Alcoa (AA) and DuPont (DD). Defensive stocks like Wal-Mart (WMT) and McDonald's (MCD) were the lone advancing stocks on the index.
Energy stocks took the brunt of the damage on Wednesday, sliding 5% as a sector as crude oil plunged nearly $3. Individual names like XTO Energy (XTO) and Sunoco (SUN) tumbled even further. The sector was also hurt by Valero (VLO), which lost nearly one-fifth of its market value after warning of an unexpecetd second-quarter loss.
Crude oil was on track to end in the red for the second-straight day following six days of gains after a bearish inventory report showed crude stockpiles unexpectedly tumbled by 2.9 million barrels last week.Crude was recently down $2.87 per barrel, or 4.19%, to $65.68. Gold backed away from $1,000 per ounce, sliding $12.40 per ounce, or 1.28%, to $972.
The Institute for Supply Management's service sector index inched just moderately higher in May, rising from 43.7 to 44. Economists had forecasted a reading of 45.
At the same time, the Commerce Department said U.S. factory orders grew 0.7% in April, shy of Wall Street's expectation for a 1% increase. Still, it's a big improvement from March when orders slid 1.9%.
The data overshadowed the ADP report, which showed employers slashed 532,000 jobs in May -- the fewest jobs lost since November. Economists had expected 550,000 jobs to have been shed. Still, private-sector jobs remain at a five-year low and have declined for 16-straight months -- the longest streak since 2002.
Meanwhile, Bernanke testified on Capitol Hill about the Obama Administration's 2010 budget and the state of the economy. The central bank chief acknowledged that the U.S. can't borrow indefinitely and admitted Treasury yields have risen in recent weeks at least partially due to deficit worries. Bernanke also said the pace of the recession appears to have slowed but to expect "sizable" job losses in the near term.
Corporate Movers
Toll Brothers (TOL) beat the Street with an adjusted loss of 3 cents per share, compared to estimates for a loss of 50 cents per share. Toll said it sees signs buyers are beginning to “re-enter the new home market.” However, the luxury home builder, whose revenue plunged 51%, declined to issue guidance.
Hovnanian (HOV) narrowed its quarterly loss to $1.50 per share, topping estimates for a loss of $1.83 per share. Revenue tumbled 49% to $398 million.
Valero (VLO) warned late Tuesday it will post a loss of 50 cents per share amid weak demand, shocking analysts who expected a profit of 69 cents per share.The refiner also said it will delay two expansion projects and sell 40 million shares.
American International Group (AIG) reached a deal to sell its main headquarters and an adjacent building in lower Manhattan, The Wall Street Journal reported. It’s not clear who the buyer is nor what the bailed-out insurer will receive for the buildings.
Aetna (AET) saw its shares tumble a day after the health insurer slashed its full-year guidance on higher medical costs for its commercial business unit. The company now sees earnings in the range of $3.55 to $3.70 per share.
Williams-Sonoma (WSM) suffered a 22% decline in net revenue last quarter, sending the kitchen appliance store to a loss of 14 cents per share. However, analysts had been bracing for a steeper loss and the company backed its full-year guidance.
World Markets
European stocks took a plunge, giving back some of this week’s rally. London’s FTSE 100 slid 2.09% to 4383.42, Germany’s DAX lost 1.74% to 5054.53 and France’s CAC 40 dropped 2.02% to 3309.65.
Asian markets stayed hot as Japan’s Nikkei 225 climbed 0.38% to 9741.67 and Hong Kong’s Hang Seng jumped 1.02% to 18576.47.
