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The Dow's longest winning streak in nearly three months came to a decisive conclusion on Thursday as the blue-chip index tumbled nearly 100 points amid a deep dive in crude oil prices, which dragged down energy stocks.
Today’s Markets
The Dow Jones Industrial Average slid 93.79 points, or 0.91%, to 10197.47, the S&P 500 fell 11.27 points, or 1.03%, to 1087.24 and the Nasdaq Composite lost 17.88 points, or 0.83%, to 2149.02.The FOX 50 dropped 6.51 points, or 0.81%, to 800.46.
Aside from a 3.3% slide in oil prices, the selloff was fueled by the U.S. dollar, which enjoyed its biggest rally against the euro since Aug. 7 and weighed on stocks and commodities. Thursday's ugly session, the worst in nearly two weeks on Wall Street, erased a slice of the 519-point surge on the Dow from its recent run.
“I’m completely unconvinced of a sustaining rally for a variety of reasons,” said Frank Davis, director of sales and trading at LEK Securities, pointing in particular to the speed of the recent rally. “To sustain any quick move you need to have the fundamentals behind it and I don’t believe they have developed enough.”
Underscoring that skepticism, Wall Street mostly shrugged off upbeat news on Thursday, including Hewlett-Packard's (HPQ) $2.7 billion deal to buy 3Com (COMS) and a better-than-expected report revealing initial jobless claims slumped last week to their lowest level since the beginning of the year.
Most Dow stocks reached the finish line in the red, led by JPMorgan Chase (JPM), Caterpillar (CAT) and Bank of America (BAC). On the upside, Microsoft (MSFT) and Wal-Mart (WMT) climbed nearly 1% a piece.
The main culprit for Thursday's selloff was crude oil, which settled at one-month lows amid the strengthening greenback and a bearish oil inventory report. The Department of Energy said crude oil stockpiles unexpectedly soared by 1.7 million barrels last week as gasoline inventories jumped by 2.6 million barrels, indicating weak demand. Crude fell $2.34 a barrel, or 2.95%, to $76.94. Ending an eight-day rally, gold sank $8 an ounce, or 0.72%, to close at $1106.
The Dow (black line) and Oil (red line) intraday
Not surprisingly, the energy sector was the weakest performing group, sinking 2.2%. Individual energy companies like Schlumberger (SLB) and XTO Energy (XTO) saw even heavier selling.
At the same time, the dollar jumped 0.94% against the euro, putting pressure on the broader markets. The greenback, which has played an outsized role in moving the markets since the summer, appears to have stabilized this week. While a long-term positive, a stronger dollar could threaten the economic recovery by making U.S. goods more expensive overseas. The stabilization comes after Treasury Secretary Tim Geithner reiterated the U.S.'s strong dollar policy and commitment to reduce debt at a conference in Asia earlier this week.
"I do suspect we have reached an inflection point,” Peter Kenny, managing director at Knight Capital Group, wrote in a note to clients, referring to the greenback.
Meanwhile, the S&P retail sector dropped almost 2% after retail king Wal-Mart (WMT) beat the Street with third-quarter EPS of 84 cents but said its revenue rose by a worse-than-expected 1.1% to $98.67 billion. While it boosted its full-year EPS guidance above the Street’s view, Wal-Mart said it continues to “operate in a very challenging environment” and sees below-consensus fourth-quarter EPS.
The markets had little reaction to the latest positive sign in the labor market as the government said initial jobless claims fell by 12,000 last week to 502,000 -- the lowest level since January. Analysts had been projecting a drop of just 2,000. Continuing claims, which are filed by those on benefits for more than a week, slid 139,000 to 5.63 million.
Corporate Movers
Intel (INTC) agreed to pay rival chip maker Advanced Micro Devices (AMD) $1.25 billion to settle all antitrust and IP disputes between the companies. The news sent AMD’s stock up 22% to a 52-week high.
General Electric (GE) unloaded its security unit in a $1.82 billion deal with conglomerate United Technologies (UTX), allowing GE to focus on its core businesses and a potential NBC Universal joint venture with Comcast (CMCSA). The deal bolsters UTC’s security business, which already includes Chubb locks and Kidde fire systems and frees GE up to expand its core businesses of infrastructure, oil and gas equipment.
Playboy Enterprises (PLA) soared as much as 66% to 52-week highs after Bloomberg News reported the men’s magazine publisher is in talks to sell itself to Iconix Brand (ICON). However, Playboy’s stock pared its gains after the company issued a “no comment” statement on the M&A talk.
Kohl’s (KSS) beat the Street with a 21% increase in third-quarter EPS to 63 cents. While the retailer’s revenue topped estimates by rising 6.5% to $4.05 billion, Kohl’s projected EPS of just $1.14 to $1.24 for the current quarter. Analysts had expected fourth-quarter earnings of $1.25 a share.
Urban Outfitters (URBN) reported a third-quarter profit of 36 cents a share, exceeding estimates by a penny. The apparel retailer’s sales climbed by a better-than-expected 6% to $505.9 million.
Activision-Blizzard (ATVI) said it sold 4.7 million copies of the latest incarnation of its popular “Call of Duty” video game franchise in the first 24 hours of its release. The blockbuster sales figures mark one of the largest opening-day performances in video game history and exceed the 4 million copies sold in a big-budget video game’s traditional lifecycle.
Global Markets
European stocks inched higher as the U.K.'s FTSE 100 gained 0.19% to 5276.50, France's CAC 40 closed up 0.17% to 3808.07 and Germany's DAX rose 0.08% to 5663.96.
In Asia, Tokyo's Nikkei 225 slipped 0.68% to 9804.49, Hong Kong's Hang Seng fell 1.01% to 22,397.57 and China's Shanghai Composite dropped 0.07% to 3172.94.
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