The Dow plummeted nearly 250 points on Wednesday as profit warnings, scary job-loss predictions and a $6 plunge in crude oil provoked the biggest one-day selloff on WallStreet in a month.
Today’s Markets
The Dow Jones Industrial Average lost 245.40 points, or 2.72%, to 8769.70, the S&P 500 fell 28.06 points, or 3.00%, to 906.64 and the Nasdaq Composite slid 53.52 points, or 3.23%, to 1599.06. The consumer-friendly FOX 50 dropped 21.25 points, or 3.00%, to 687.46.
The markets drowned in a sea of gloomy headlines as Intel (INTC) and Time Warner (TWX) issued profit warnings and aluminum maker Alcoa (AA) unveiled 13,500 new job cuts. Wednesday's selloff marked the steepest decline for the Dow since the benchmark index plummeted 680 points on December1.
“We’ve got pretty much a boatload of bad news. It's not surprising to see the market react the way it has," said Art Hogan, chief market strategist at Jefferies & Co., pointing to a new ADPreport predicting the private sector lost nearly 700,000 jobs in December. "It’s not as though this wasn’t a well-telegraphed event. But today’s number was so eye-poppingly bad that it knocked the market back off its feet.”
Alcoa (AA) and DuPont(DD) suffered the steepest declines on the Dow. Tech heavyweights Intel and Microsoft(MSFT) also saw heavy selling amid steep declines for the tech sector. On the other hand, Verizon (VZ)and GeneralMotors (GM)were two of the lone advancing stocks on the blue-chip index.
“We do have a while to go before this is all over unfortunately,” said Stephen Carl, head trader at Williams Capital.
Wall Street’s labor fears were stoked by the ADP report, which predicted the U.S. private sector lost 693,000 jobs last month, exceeding expectations for just over 500,000 job losses. Those dismal job-loss predictions were seconded by a separate report from Challenger, Gray & Christmas, which said December job cuts soared four times higher than a year ago.
None of this bodes well for Friday's closely-watched employment report, which Wall Street fears will show the unemployment rate jumped to 7% in December as employers likely cut an additional 475,000 jobs.
Fears about the jobs report could lead to more losses on Thursday as the S&P 500 has fallen an average of 3.02% in the session preceding the past six reports, says RyanDetrick, equities analyst at Schaeffer's Investment Research.
Markets Drown in Corporate News
In another sign of the weakening labor market, Alcoa unveiled plans late Tuesday to slash 13,500 jobs, or approximately 13% of its salary workforce, and freeze hiring and salaries. Alcoa, which has been slammed by weak demand due to the recession, also said it will slash corporate expenditures by 50%.
Meanwhile, tech stocks came under heavy pressure Wednesday after chip king Intel (INTC) warned its sees fourth-quarter revenue widely missing expectations due to further weakness in demand. Intel predicted revenue will plunge 23% to $8.2 billion, compared to expectations for revenue of $8.8 billion.
Also, media titan Time Warner (TWX) announced $25 billion in writedowns at its AOL, cable and publishing businesses that will result in an unexpected 2008 loss. Shares of Time Warner fell sharply as analysts had predicted earnings of about $1.04 per share.
Govt. Report Sends Crude Reeling
Thanks to the 10th steepest one-day percentage drop for crude oil on record, the energy sector was the biggest drag on Wall Street, diving almost 5% on the day. Individual energy names such as Valero (VLO) and XTOEnergy (XTO) plummeted even further.
The oil market was stunned by a new Department of Energy report showing crude oil inventories unexpectedly surged by 6.7 million barrels last week as demand continues to deteriorate. The price of a barrel of crude plummeted to $42.63, down $5.95, or 12.25%, on the day.Wednesday marked the steepest one-day dollar decline since October 10.
As recently as Tuesday afternoon the commodity topped $50 a barrel, capping off a recent hot streak. Analysts had anticipated the government report would reveal a build of just 700,000 barrels of crude.
"Guess what? We're not consuming oil. The economy is slow," Phil Flynn, energy analyst at Alaron Trading, told FOXBusiness. "All of this bad news basically means that oil prices are probably still too high."
Corporate Movers
Monsanto (MON), the world's largest seed company, boosted its full-year forecast and beat the Street with a 117% surge in fiscal first-quarter profit.
Bank of America (BAC) raised $2.83 billion by selling part of its stake in China Construction Bank. The banking giant profited $1.13 billion from the transaction.
Family Dollar(FDO) topped expectations with first-quarter earnings of 42 cents per share and upgraded its fiscal-year guidance for earnings and sales.
Sprint (S) could close up to 20 call centers in 2009, CEODaniel Hesse said at a Citigroup investor conference, according to Dow Jones.
BP (BP), formerly British Petroleum, saw its shares sink on rumors the energy company is warning analysts of weaker-than-expected earnings for the fourth quarter. BP, which has been dogged by similar reports in the past, denied the rumors.
Constellation Brands (STZ), the world’s largest wine producer, beat the Street with adjusted-earnings of 60 cents per share in the prior quarter. The company also cut the top end of its fiscal 2009 guidance.
Cabot (CCMP) warned the global economic weakness has led to “an unprecedented drop in demand” for its semiconductor products, leading the company to issue guidance for the previous quarter well below estimates.
Raytheon (RTN) exec William Lynn plans on accepting an offer to serve as the No. 2 official at the Pentagon, The Wall Street Journal reported.
Global Markets
European markets ended in the red, while Asian markets closed mixed overnight.
The Dow Jones Euro Stoxx 50 Index, which gauges the 50 largest companies in Europe, slumped 1.55% to 2538.55, halting a five-day win streak.. London saw the heaviest selling as its FTSE 100 sank 3.4%, ending a six-day win streak and suffering its worst one-day decline since December 1.
In Asia, Tokyo's Nikkei 225 gained 1.74% to 9239.24 while Hong Kong's Hang Seng dropped 3.37% to 14987.46. Australia's ASX 200 gained 1%.
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