It was a matter of “too little too late” for Wall Street on Monday. Despite a wave of late-day buying, it wasn’t enough to carry the Dow into positive territory -- or over the pivotal 8000 threshold -- and rebound from its worst January on record.
Today’s Markets
The Dow Jones Industrial Average lost 64.11 points, or 0.80%, to 7936.75, the S&P 500 fell 0.45 points, or 0.05%, to 825.43 and the Nasdaq Composite jumped 18.01 points, or 1.22%, to 1494.43. The consumer-friendly FOX 50 slid 0.49 points, or 0.08%, to 617.73.
“It kind of feels like a summer Monday today. The volume is low. I don’t know if it’s a little hangover from the Super Bowl yesterday," NYSEtrader Jonathan Corpina of Meridian Equity Partners told FOX Business.
The markets were clearly spooked by a number of bearish headlines, including more potential job cuts for Macy's (M) and Morgan Stanley (MS), $40 crude oil prices, a weaker-than-expected construction report and the first six-month consumer spending drought on record.
The spending report "confirms what we already know. People simply aren't spending," said Ryan Detrick, equities analyst at Schaeffer's Investment Research. "The bad news is just continual.”
Nearly half of the Dow's 30 components ended in the green on Monday, led by tech titans Intel (INTC) and Microsoft (MSFT). On the other hand, Bank of America (BAC), General Motors (GM) and 3M (MMM) suffered the steepest losses on the benchmark index.
It was a vastly different picture for the Nasdaq Composite, however, as tech stocks likeYahoo!(YHOO) and Amazon.com (AMZN) carried the index to big gains. Nvidia(NVDA) and Intel were two of the largest percentage gainers on the Nasdaq 100, canceling out steep losses for Electronic Arts(ERTS) and Bed, Bath & Beyond(BBBY).
“When we rally it’s more hopes and wishes, and when we sell off it’s more reality. In that kind of environment you really have to be quite nimble,” Peter Boockvar, equity strategist at Miller Tabak, told FOX Business.
Even the most nimble investors likely haven't avoided the red so far in 2009 as the Dow fell 773 points last month, the worst January performance in its 113-year history. The ugly start to the year doesn't bode well as the Dow's January performance has been an accurate predictor of the full year's direction 75% of the time.
“The good news is they are holding here. The bad news is we’ve got no capability to move anywhere. There is just a tremendous amount of bad news,” said Frank Davis, director of sales at LEK Securities.
Bleak Corporate, Economic Headlines
A mid-afternoon comeback attempt was halted when Macy's (M) unveiled plans to slash 7,000 more jobs and cut its quarterly dividend to fight the recession. Also, The Wall Street Journal reported Monday afternoon that Morgan Stanley (MS) could announce plans to cut 1,500 to 1,800 jobs in layoffs that would impact 3% to 4% of its work force.
“If you can’t go shopping at Macy’s, where are you going to shop? Individually these stories really aren’t significant but it just adds” to the gloom and doom, said Davis.
The government said consumer spending fell by a worse-than-expected 1%in December, a record sixth straight month of declines. For 2008, personal spending, which accounts for more than two-thirds of the nation's GDP, rose just 3.6%, the smallest increase since 1961.
The markets failed to rally around a a better-than-expected manufacturing report from the Institute of Supply Management. The group's index unexpectedly improved in January to a 35.6 reading, up from its record low of 32.9 the month before.
On the other hand, the government said construction spending plunged by 1.4% in December, its third consecutive monthly decline.
All Eyes on Washington
Meanwhile, the markets continue to watch the action in Washington as lawmakers consider President Barack Obama's economic stimulus package. While the House signed off on the $800 billion spending and tax cut bill, it could face more opposition in the Senate.
There is considerably more uncertainty surrounding a new rescue for the nation's shaky financial institutions. The White House hasn't settled on a plan yet but the government could offer a two-pronged rescue to buy a portion of banks' bad assets while offering guarantees against future losses on some of the rest, the Journal reported.Treasury Secretary Timothy Geithner will unveil the new bailout plans in a speech next week, the Journal reported.
"We are kind of in a wait-and-see [mode]for a resolution. Until that happens, unfortunately it’s going to be more of the same," said Detrick.
In the energy market, crude oil futures plummeted at the close of trading, shoving stocks like Hess (HES)and Valero (VLO) deeper into the red. The price of a barrel of crude ended at $40.08, down $1.60 on the day. Amid the economic turbulence, crude oil prices slumped 6.55% in January, its seventh straight monthly decline.
Corporate Movers
Mattel (MAT) lost nearly one-fifth of its market value after the world's largest toy maker widely missed Wall Street’s estimates by posting a quarterly profit of 49 cents per share on an 11% dive in sales.
Ford (F) could need a government bailout by late 2009 as the auto sector continues to deteriorate, a Barclays analyst predicted. Barclays also downgraded Ford to “underweight” from “equal-weight” and slashed its price target to $1 from $4.
American International Group (AIG) could be in line for more government aid. The insurance giant is in talks about the government backstopping some of its toxic assets and is considering selling some of its businesses through IPOs, the Journal reported. The government threw AIG a $150 billion lifeline last year.
Rio Tinto (RTP) confirmed it is in asset sale talks with rival Chinalco in an effort to reportedly cut its debt by up to $8 billion.
Humana (HUM) beat the Street with an adjusted-profit of $1.07 per share and backed its 2009 guidance.
Global Markets
European stock markets ended in the red for the third straight day as the Dow Jones Euro Stoxx 50 Index, which gauges the 50 biggest companies in Europe, fell 1.71% to 2198.74. London’s FTSE 100 sank 1.73% while Germany’s DAX fell 1.55%.
In Asia, Tokyo's Nikkei 225 fell by 1.5% to 7873.98 while Hong Kong's Hang Seng sank 3.14% to 12861.49. Australia's ASX 200 fell by 1.2%.
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