Dragged down by a bad day for the tumultuous financial sector, stocks took a dive on Thursday, ending Wall Street's recent hot streak and wiping out all of Fed Day's gains.
Today's Markets
The Dow Jones Industrial Average lost 85.78 points, or 1.15%, to 7400.80, the S&P 500 fell 10.31 points, or 1.30%, to 784.04 and the Nasdaq Composite Index tumbled 7.74 points, or 0.52%, to 1483.48. The consumer-friendly FOX 50 sank 8.46 points, or 1.42%, to 585.68.
Aside from sinking shares of banks like Citigroup (C) and Goldman Sachs (GS), the markets were also under pressure from a flurry of bleak economic reports, a $70 spike in gold prices, three-month highs for oil and disappointing results from bellwether FedEx (FDX).
Few were surprised to see the markets suffer a pullback as the Dow had rallied in six of its last seven days, adding 1,000 points since hitting 12-year lows. Thursday's losses, which were Wall Street's worst since March 5, came after the Dow jumped almost 100 points on Wednesday after the Federal Reserve unveiled plans to pump another $1 trillion into the shrinking economy.
“We’ve had five or six really good days. It’s okay to give a little back,” NYSE trader Ted Weisberg told FOX Business. “Nothing fundamentally has changed. We know the rally is technical.”
More than half of the Dow's 30 components ended in the red, led by Bank of America (BAC),JPMorgan Chase (JPM) and Citigroup (C). On the other hand, Alcoa (AA)rebounded from its two-day plunge and General Motors (GM) rose sharply on news of a bailout for the auto-parts suppliers.
Even with Thursday's losses, the Dow is still on track for its first back-to-back weekly gains since May 2008.
The Nasdaq Composite fared better than the broader market, thanks in part to business software giant Oracle (ORCL), which late Wednesday reported better-than-expected quarterly results and surprised Wall Street by announcing plans to pay a dividend.
Wall Street is clearly still digesting the Fed's newly-announced plans to buy up to $300 billion in long-term U.S. Treasurys and another $750 billion of mortgage-backed securities. The moves, aimed at making credit more accessible and ending the 14-month recession, had an immediate impact as the 10-year Treasury note on Wednesday took its largest one-day drop since the aftermath of the 1987 stock market crash.
While the equity markets initially cheered the unprecedented action, some are concerned about the threat of strong or hyperinflation, underscored by huge gains in the commodity markets Thursday.
Banks Reverse Course
Financial stocks like Morgan Stanley (MS) ended deeply in the red, giving up earlier gains despite General Electric (GE) saying Thursday it expects its troubled GECapital unit to be profitable in the first quarter and 2009.
Also, shares of Citigroup (C) initially surged but then plunged after the bailed-out bank said it will ask for permission to perform a reverse stock split, a move that will boost the company's stock price but increase the number of shares outstanding.
Gold, Oil Soar on Dollar's Plunge, Fed
Commodities surged on Thursday in response to the sharply weaker dollar, which continued its selloff on fears the Fed's latest moves will result in a jump in inflation.
Just a day after the energy market was rattled by a bearish inventory report, the price of a barrel of crude soared $3.47 to $51.61, its highest price since Nov. 28.
Building on a late-day move from Wednesday, gold, which is seen as an inflation hedge, settled at $958.30 per ounce after surging $69.50, its strongest rally since Sept. 17.
Data Dump
The Labor Department said initial jobless claims declined by a better-than-expected 12,000 to 646,000 last week. On the other hand, the government said claims filed by people out of work for more than a week soared by 185,000 to 5.47 million.
The Philadelphia Fed said its manufacturing index improved to -35 in March, topping estimates but showing continued contraction. Separately, the Conference Board said its leading economic indicators index declined 0.4% last month, beating expectations.
Corporate Movers
American Axle (AXL), Lear (LEA) and auto-parts suppliers surged after the Treasury Department promised the industry $5 billion in aid to prevent a collapse that could threaten Chrysler, Ford (F) and General Motors (GM).
FedEx (FDX) saw its shares jump even after the bellwether missed expectations with a 75% plunge in profit. FedEx said sales slumped 14% and announced plans to cut costs by another $1 billion. However, the shipping giant said it is gaining market share despite the recession.
Cisco (CSCO) unveiled plans to buy privately held digital camcorder-maker Pure Digital Technologies for $590 million in stock.
Microsoft (MSFT) CEOSteve Ballmer said he is "sure" the software giant will restart talks with Yahoo!(YHOO) about doing a search deal, according to Reuters.
Discover Financial (DFS)suffered a 50% drop in earnings from continuing operations in the latest quarter. The fourth-largest U.S. credit card network also said it will slash its dividend by 67%.
Barnes& Noble (BKS) posted a 30% drop in fourth-quarter net income as same-store sales slumped 7.3%. The largest U.S. book retailer sees a first-quarter loss.
Corning (GLW) said it expects to post an adjusted-profit in the first quarter and sees price declines moderating in the second quarter.
Global Markets
European markets jumped for the second-straight session. Germany's DAX rose 1.18% to 4043.46 and London's FTSE 100 gained 0.31% to 3816.93.
Asian markets ended narrowly mixed overnight as Japan's Nikkei 225 tumbled 0.33% to 7945.96 and Hong Kong's Hang Seng rose 0.1% to 13130.92.
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