Stocks tumbled today, with the Dow Jones industrials hitting a new six-year low, on concern the government will be forced to take over some of the nation's biggest banks as well as weakness in technology stocks.
The pullback came as new economic reports expanded the picture of slumping domestic and global economies that will likely take years to recover.
The Dow closed down 90 points, or 1.2%, to 7,466, its lowest close since Oct. 8, 2002, the low reached after the bursting of the dot-com bubble and the Sept. 11, 2001, terror attacks.
The Dow's decline also produced a new bear-market low for the index since its October 2007 market peak. The old closing low was 7,552.29 on Nov. 20; its intraday low is 7,449.38, set on Nov. 21.
The Standard & Poor's 500 Index was off 9 points, 1.2%, to 779, its lowest close since Nov. 20. The Nasdaq Composite Index dropped 25 points, 1.7%, to 1,443.
The pressure on stocks today came from weakness in technology giant Hewlett-Packard (HPQ, news, msgs) and banking stocks, which were battered again today on worries that new federal regulatory standards might force the government to take control of some banks, wiping out shareholders in the process.
There is great frustration with the Treasury's lack of detail so far on its plans to fix the banks, and that's given short sellers carte blanche to drive financial stocks lower. There is also resentment about the Obama administration's plan to rescue homeowners struggling with their mortgages.
Citigroup (C, news, msgs) was off 13.8% to $2.51, and Bank of America (BAC, news, msgs) was off 14% to $3.93.
General Electric (GE, news, msgs), which trades like a financial stock, briefly dropped below $10 for the first time since 1995, but finished at $10.06, off 4.6%.
Prudential Financial (PRU, news, msgs) sank 15.9% to $19.02, the seventh-worst loss among S&P 500 stocks, after Fitch cut its ratings on the insurer’s credit, cutting off the holding company’s access to the commercial paper market. Though its insurance unit still qualifies, the holding company no longer qualifies for access to the Federal Reserve’s Commercial Paper Funding Facility.
The ratings cut for Prudential hit other insurance and financial services stocks. Hartford Financial Services (HIG, news, msgs) fell 24.5% to $7.73. Genworth Financial (GNW, news, msgs) fell 18% to $1.59, and Met Life (MET, news, msgs) fell 8.2% to $22.22.
The Standard & Poor's Financial Sector Index fell to 100.67, its lowest level since December 1994.
HP fell 7.9% to $31.39, and its weakness spread to IBM (IBM, news, msgs), down 2.8% to $88.93, Apple (AAPL, news, msgs), down 4% to $90.64, and Dell (DELL, news, msgs), down 6.1% to $8.12.
Futures trading suggests the market will open with a small loss on Friday. The government will issues its monthly Consumer Price Index report, which is expected to show little inflation if any.
In addition, earnings reports are due from retailers J.C. Penney (JCP, news, msgs) and home-improvement retailer Lowe's (LOW, news, msgs).
Is the Dow headed to 6,500?
The Dow's finish raised fears that the U.S. stock market will continue to drop. The next big test for the market is whether it can hold at the S&P 500's Nov. 20 close of 752.44. Many analysts believe stocks could fall below that level.Louise Yamada, a respected Wall Street technical analyst, sees the S&P 500 bottoming at 680, with the Dow bottoming at 6,500.
With today's close, the Dow has fallen nearly 10% in the last eight sessions.
The blue-chip index is down 14.9% this year and 47.3% since peaking on Oct. 9, 2007. The S&P 500 is off 13.8% for the year and 50.2% from its 2007 high. The Nasdaq is off 8.5% this year and has slumped 49.5% since Oct. 31, 2007.
The woes for the U.S. market have plenty of company.
Japan's Nikkei 225 Index ($N225), down 56.7% from its 2007 high, is now flirting with levels last seen in 1982. Germany's Dax Index ($DE:DAX) is down 45.6% from its 2007 high. Brazil's Bovespa Index is off 46% from its high in May 2008.
European financial markets have been pressured because of concern about economies in eastern Europe.
- Top Stocks blog: Why eastern Europe's meltdown matters
| Index | Today | Since market low | Since Oct. 2007 peak |
|---|---|---|---|
| Dow Jones Industrial Average | 7,465.95 | 0.00% | -47.29% |
| Standard & Poor's 500 Index | 778.94 | 3.52% | -50.23% |
| Nasdaq Composite Index | 1,442.82 | 9.63% | -49.54% |
| Nasdaq-100 Index | 1,167.89 | 12.68% | -47.84% |
| Russell 2000 Index | 416.71 | 8.15% | -51.31% |
The Dow's closing low came today; the other closing lows were on Nov. 20.
The day's nasty economic news
Pressuring stocks today were two disappointing bits of economic news:The Labor Department reported that 627,000 Americans filed initial claims for unemployment benefits last week.
That number was unchanged from the previous week, which was revised up from an earlier reading of 623,000. Continuing claims for unemployment hit a 27-year high, rising by 170,000 to 4.98 million for the week ending Feb. 7.
Then, the Philadelphia Federal Reserve Bank's report on manufacturing activity in the mid-Atlantic region came in at negative 41.3 for February -- surprising economists and marking the lowest reading since October 1990.
The Philly Fed index reading was a big surprise; economists had predicted a reading of negative 24, the same as January's reading.
Before the recession, the index typically registered in a range from 35 to 50. The index is calculated using responses from a survey of manufacturing executives in the region about business conditions.
Rising crude boosts energy shares
Energy stocks were mostly higher as crude oil closed up $4.86 to $39.48 a barrel. An Energy Department report on oil supplies showed an unexpected decrease of 200,000 million barrels last week. Analysts had expected supplies to rise to about 4 million barrels last week, which would have been an 11-year high. Oil supplies in the U.S. have risen by about 20% since last summer, as consumers cut back on driving in the recession.Anadarko Petroleum (APC, news, msgs) was up 2.2% to $36.04. Oil and gas drilling company Noble (NE, news, msgs) rose 3.4% to $24.98.
Crude is up more than 5% this week, helped by increasing evidence that member nations of the Organization of Petroleum Exporting Countries are sticking to their agreement to cut production by about 4 million barrels per day.
Still, the price of oil has tumbled about 75% since its closing peak of $145.08 a barrel in July 2008.
| Thur. | Wed. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $39.48 | $34.62 | $4.86 | -5.28% | -11.48% |
| Heating oil (per gallon) | $1.2045 | $1.1469 | $0.0576 | -16.00% | -14.31% |
| Natural gas (per million BTU) | $4.0780 | $4.2140 | -$0.1360 | -7.67% | -27.46% |
| Unleaded gasoline (per gallon) | $1.0986 | $1.0652 | $0.0334 | -13.42% | 8.97% |
Wholesale prices up more than expected
A report on producer prices showed a surprising 0.8% increase in January, the Labor Department reported this morning. It was the first monthly rise since July. Economists had been looking for an increase of 0.1% to 0.2% last month.Producer prices fell 1.9% in December.
The core producer price index, calculated separately by excluding food and gasoline prices, rose 0.4% in January, a bigger increase than the expected 0.1%.
Also this morning, the Conference Board offered a tiny glimmer of hope that the worst part of the recession might slowly be starting to ease.
The board's index of leading economic indicators rose for the second month in a row in January, increasing 0.4% after a revised reading of a 0.2% rise in December. December's initial reading showed a 0.3% gain. The recent gains were largely due to the increase in the money supply by the Federal Reserve.
The index looks at changes at a number of economic components.
HP lowers full-year outlook
Hewlett-Packard isn't immune to the pullback in consumer and corporate spending.The personal computer maker late Wednesday said that 2009 profit, excluding charges, will be between $3.76 and $3.88 per share, lower than a previous forecast of between $3.88 and $4.03 per share. Wall Street is looking for $3.78 per share.
HP also said it earned 93 cents per share in its fiscal first quarter, excluding items, in line with expectations.
- Top Stocks blog: Is Sprint turning things around?
Sales of personal computers rose at the slowest pace in six years over the holidays, according to research firms Gartner and IDC, and HP felt the pain.
Revenue in the fiscal first quarter rose 1% to $28.8 billion, but that figure was about $3 billion shy of analysts' expectations.
Stock Charts (Year)
Hewlett-Packard
"They are vulnerable to weakening PC sales," Calyone Securities analyst Shebly Seyrafi told Reuters. "Shares are down on a combination of the actual results, the revenue mess and the lowering of the annual guidance. There are lots of reasons to be concerned about Hewlett-Packard."
"We are assuming market conditions we saw in the first quarter will persist," Chief Financial Officer Cathie Lesjak said on a conference call with analysts late Wednesday.
HP said it expects earnings of 84 cents to 86 cents per share for the current quarter on revenue of $27.4 billion to $27.7 billion, which would be a 2% to 3% decline from revenue in the second quarter of 2008.
Spam sparks sales at Hormel
Hormel Foods (HRL, news, msgs) this morning reported an 8% decline in first-quarter profit, but the stock jumped 7.9% to $32.81 because earnings beat Street estimates.Hormel earned $81.4 million, or 60 cents per share, down from $88.2 million, or 64 cents per share, in the same quarter a year ago. Analysts were looking for 51 cents per share.
Profit in Hormel's Jennie-O Turkey Store products fell 16% because of an oversupply of turkey breast meat, and higher-than-expected hog costs pushed profit at its refrigerated foods division down 27%.
But net sales rose 4% to $1.69 billion, as penny-pinching shoppers picked up cans of its Spam canned lunch meat and Dinty Moore stews.
Whole Foods beats the Street
From one end of the grocery store spectrum to the other.Organic grocery store chain Whole Foods Market (WFMI, news, msgs) late Wednesday said its fiscal-first-quarter profit fell 29% from the same period a year ago, but its results topped Wall Street's expectations.
Result: Shares jumped 37.2% to $12.75, tops among S&P 500 stocks.
Whole Foods earned $32.3 million, or 20 cents per share, a 17% decline from the $39.1 million, or 28 cents per share it earned the year before. Analysts had been looking for 19 cents per share.
Sales were flat at $2.5 billion, but sales at stores open at least one year fell 4% in the quarter, a big drop from the 9% gain seen in the first quarter of 2008.
But the company is banking on Americans continuing to buy products like arugula and tomatillos this year: Whole Foods expects profit between 71 cents and 76 cents for 2009, ahead of analysts' expectations of 69 cents per share.
Andrew Rosenbaum contributed to this report.
| Thur. | Wed. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.300% | 0.300% | 0.000 | 36.36% | 160.87% |
| 5-year Treasury note yield | 1.881% | 1.783% | 0.098 | 0.43% | 21.28% |
| 10-year Treasury note yield | 2.857% | 2.728% | 0.129 | 0.46% | 27.32% |
| 30-year Treasury bond yield | 3.688% | 3.525% | 0.163 | 2.36% | 37.05% |
| Currencies | |||||
| U.S. Dollar Index | 87.750 | 88.330 | -0.580 | 1.49% | 6.82% |
| British pound in dollars | $1.4302 | $1.4245 | 0.0057 | -1.47% | -2.93% |
| Dollar in British pounds | £0.6992 | £0.7020 | -0.0028 | 1.50% | 3.02% |
| Euro in dollars | $1.2673 | $1.2560 | 0.0113 | -1.12% | -9.54% |
| Dollar in euros | € 0.7891 | € 0.7962 | -0.0071 | 1.13% | 10.55% |
| Dollar in yen | 94.28 | 93.62 | 0.66 | 4.91% | 4.00% |
| Canadian dollar in U.S. dollars | $0.795 | $0.794 | $0.0014 | -2.30% | -2.74% |
| U.S. dollar in Canadian dollars | $1.258 | $1.259 | -$0.0013 | 2.35% | 2.82% |
| Commodities | |||||
| Gold | $976.50 | $978.20 | -$1.70 | 5.18% | 10.43% |
| Copper | $1.4880 | $1.4545 | $0.03 | 1.33% | 5.53% |
| Silver | $13.9350 | $14.2900 | -$0.35 | 10.90% | 26.52% |
| Corn | $3.5325 | $3.4925 | $0.04 | -6.79% | -13.21% |
| Crude oil (NYMEX) (per barrel) | $39.48 | $34.62 | $4.86 | -11.48% | -11.48% |
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