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Stocks suffered a triple-digit slump on Tuesday as a resurgent U.S. dollar fanned a wave of selling in crude oil and gold and sparked a selloff in commodity-related stocks.
Today’s Markets
The Dow Jones Industrial Average fell 104.14 points, or 1.00%, to 10285.97, the S&P 500 lost 11.31 points, or 1.03%, to 1091.94 and the Nasdaq Composite sank 16.62 points, or 0.76%, to 2172.99.The FOX 50 dropped 7.99 points, or 0.98%, to 809.03.
The selloff is the latest example of the markets moving in the opposite direction of the U.S. dollar, which soared more than 1.2% against a basket of currencies and hit a two-month high against the euro after Fitch downgraded Greece’s credit rating. The stronger greenback put heavy pressure on commodities as crude oil posted its longest losing streak in five months and gold suffered its steepest three-day dollar drop since late March.
Almost every Dow stock finished in the red, led by DuPont (DD), General Electric (GE) and Bank of America (BAC). The only advancing blue-chip stock was telecom giant Verizon (VZ).
Joe Saluzzi, co-head of trading at Themis Trading, attributed Tuesday’s selloff in part to the calendar, saying portfolio managers are looking to protect their big gains before the end of the year.
“Do I think this is the start of a down draft? No, I think it’s going to be back-and-forth for a while,” said Saluzzi. “I’ve given up trying to time the damn thing. I am extremely bearish on the economy, which I think will come back to haunt the market. In the mean time, I think it still goes higher.”
The selloff comes after the markets ended essentially unchanged on Monday and failed to rally around Friday’s surprisingly strong jobs report.
Wall Street was driven lower by the U.S. dollar, which gained 0.74% against the euro after Fitch slashed Greece’s credit rating to “BBB+” from “A-" amid concerns about its heavy debt load. Shares of National Bank of Greece (NBG) plunged almost 10% on the credit rating news.
The greenback is up 2.52% against the euro over the last three sessions and ended at its highest level since Oct. 7. A weaker dollar had been a bullish catalyst for the markets in recent weeks as traders bet it will boost demand for commodities and make U.S. companies more profitable overseas.
The energy sector (XLF) took the brunt of the damage, sinking almost 2% as crude oil fell for the fifth-straight day. Crude slid $1.31 a barrel, or 1.77%, to $72.62 -- its lowest settle in two months. Energy stocks like BP (BP) and Massey Energy (MEE) fell sharply.
At the same time, basic materials and gold stocks took it on the chin, with Harmony Gold Mining (HMY) and Silver Wheaton (SLW) diving more than 5% a piece. Falling for the third day in a row, gold lost $20.60 per troy ounce, or 1.77%, to $1142.80. The precious metal is down 6.13% over the last three sessions, its steepest percentage decline since late October.
“There is some sentiment towards taking risk off the table and that is weighing on the commodities,” said Nick Kalivas, vice president of financial research at MF Global.
The selloff in the commodities complex overshadowed FedEx’s (FDX) upgraded outlook. The parcel and office supply company hit a 52-week high after it said it expects EPS of $1.10 in the current quarter, citing lower operational costs and growth in shipping abroad. Earlier FedEx had forecasted EPS of 65 cents to 95 cents.
Corporate Movers
McDonald’s (MCD) saw its shares sink more than 2% after the Dow component said its global same-store sales rose 0.7% in November, missing the Street’s view for a rise of 1%. In the U.S., McDonald's said its sales fell 0.6% last month.
3M (MMM) fell about 1% after the maker of Post-Its and Scotch Tape failed to upgrade its full-year outlook. The Dow component said it sees 2009 non-GAAP EPS of $4.50 to $4.55, which would miss analysts’ estimates for $4.94.
Procter & Gamble (PG) said its chairman and former CEO A.G. Lafley will step down at the end of the year. He will be replaced by Robert McDonald, who succeeded Lafley in July as CEO.
The New York Times Company (NYT) warned its print advertising revenue is expected to plunge 25% during the fourth quarter but said it has seen strengthening at its digital properties, forecasting a 10% increase in online revenue. The company also said “after careful consideration” of “strategic alternatives,” it has concluded the Worcester Telegram & Gazette and Telegram.com should remain part of its New England media group.
General Electric (GE) told investors its finance arm, GE Capital, will see flat earnings in 2010 and results should improve in 2011 as its balance sheet recovers, Dow Jones Newswires reported. The conglomerate sees credit losses peaking at GE Capital in 2010.
Ford Motor (F) said it plans to invest $300 million to $500 million in Michigan to build next-generation hybrid vehicles if state lawmakers approve tax credits. The move would create roughly 1,000 jobs in economically-hurting Michigan.
Global Markets
The U.K.'s FTSE 100 slipped 1.65% to 5223.13, France's CAC 40 dropped 1.43% to 3785.30 and Germany's DAX fell 1.66% to 5667.37.
In Asia, Tokyo's Nikkei 225 fell 0.27% to 10140.47, Hong Kong's Hang Seng slipped 1.18% to 22060.52 and China's Shanghai Composite was down 1.06% to 3296.66.
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