The Dow Jones industrials ($INDU) fell more than 100 points for a second straight day as stocks were dragged lower by sagging retail and metal stocks.
Financial stocks were also among the laggards because of concerns about how the Obama administration's proposals to streamline and tighten regulation of the financial services industry would affect those companies' profits.
The Dow was down 107 points, or 1.3%, to 8,505. The Standard & Poor's 500 Index ($INX) was off 12 points, or 1.3%, to 912, and the Nasdaq Composite Index ($COMPX) fell 20 points, or 1.1%, to 1,796.
The blue-chip index has fallen 3.4% this week after finishing Friday in the black for the year for the first time since Jan. 6.
Want some good news in the Dow's second 100-point decline in two days? The S&P 500 bounced off 912, its 200-day moving average, a signal that some investors don't see the market seriously tanking.
The decline was set off by disappointing results from electronics retailer Best Buy (BBY, news, msgs). Same-store sales, a key financial measure, fell more than expected.
At the same time, a Commerce Department report on building permits and housing starts was better than expected. But industrial production fell 1.1%, a seventh straight monthly loss, the Federal Reserve said.
A big issue today has been whether consumers, who normally generate roughly 70% of U.S. economic activity, are going to pump up their spending any time soon. The betting today was probably not.
Retail stocks generally were lower. Wal-Mart Stores (WMT, news, msgs) was off 0.4% to $48.25. Target (TGT, news, msgs) fell 3.7% to $38.62, and Nordstrom (JWN, news, msgs) dropped 6.8% to $18.99.
But, as with Monday's sell-off that saw the Dow fall 187 points, volume was light. Trading on the floor of the New York Stock Exchange may hit 1.1 billion shares, about a third less than normal.
Crude oil, which had fluctuated quite a bit during the day, finished down 15 cents to $70.47 a barrel today as the dollar pulled back.
| Tues. | Mon. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $70.47 | $70.62 | -$0.15 | 6.27% | 58.00% |
| Heating oil (per gallon) | $1.8250 | $1.8156 | $0.0094 | 11.48% | 29.83% |
| Natural gas (per million BTU) | $4.1290 | $4.1820 | -$0.0530 | 6.66% | -26.56% |
| Unleaded gasoline (per gallon) | $2.0711 | $2.0530 | $0.0181 | 7.63% | 105.43% |
| Retail gasoline (per gallon; AAA) | $2.6740 | $2.6690 | $0.0050 | 8.40% | 65.36% |
Banks slip ahead of Obama regulation proposal
Bank stocks were generally lower today, ahead of a speech by President Obama Wednesday that will offer details on how to shore up regulation of the nation's financial regulatory structure.The S&P 500 financial sector exchange-traded fund -- technically the Select Sector SPDR-Financial (XLF, news, msgs) ETF -- fell 1.7% to $11.96. Bank of America (BAC, news, msgs) was down 4.5% to $12.73. JPMorgan Chase (JPM, news, msgs) dropped 1.5% to $33.50.
The proposal is expected to include a number of elements, including:
- The Federal Reserve could regulate any large institutions whose failure could threaten the stability of the financial system.
- A council of regulators with broad coordinated responsibility across the financial system would be established.
- Issuers of asset-backed securities would have new reporting requirements.
The idea behind the proposal is to create a new way to seize and unwind troubled large firms that are not banks and avoid the haphazard approach to crises, such as last year's costly bailout of insurer American International Group.
There has been criticism that the U.S. patchwork of financial regulators enabled the risky behavior of the banks and other companies to go unnoticed.
Is housing getting ready for a rebound?
The short answer is maybe.The Commerce Department said today housing starts jumped 17.2% in May to a seasonally adjusted annual rate of 532,000, after tumbling 12.9% in April. Economists had expected a 5.9% gain.
The increase was helped by a 62% gain in new construction of apartments. Multifamily starts are a small component of the overall housing picture, and the month-to-month historically has been quite volatile.
Starts of single-family rose 7.5% to a 401,000 rate.
Building permits, which are a gauge of builder confidence, rose 4% to a seasonally adjusted rate of 518,000. Economists had expected permits to have risen to 509,000 from April's record low of 498,000.
But understand that these are fantastically weak numbers. Housing starts are still down 45% from a year ago and 60% from the 2007 rate of 1.36 million units. Building permits are down 47% from a year ago and off 63% from the 2007 rate of 1,39 million units.
So, at best, the numbers suggest new construction may be forming a bottom. That will be clearer by September.
Toll Bros. (TOL, news, msgs) was off 0.9% to $17.11. Pulte Homes (PHM, news, msgs) added 0.8% to $8.68, and KB Home (KBH, news, msgs) shares climbed a penny to $13.25.
The housing news followed Monday's report on builder confidence, which unexpectedly declined this month.
The National Association of Home Builders/Wells Fargo index of builder confidence fell to a reading of 15 in June from 16 in May. Readings below 50 indicate that most respondents view conditions in the industry as poor. The index hit a record low of 8 in January; it averaged 16 last year. It peaked at 72 in 2005.
"In our view, the recent housing starts reports offer convincing evidence that the market has found a bottom," Nomura Securities chief economist David Resler wrote clients this morning.
"However, this bottom is extremely low -- roughly 50% below the trend rate of new household formation in the U.S. Sustained growth in building activity from this level would be required before we turn more optimistic on the sector."
MySpace cuts staff by 30%
The restructuring continues at MySpace, whose staff will get cut by almost 30%, the News Corp. (NWSA, news, msgs) division announced today.MySpace's staff is "bloated" considering the "realities of today's marketplace," which prevents it from operating with efficiency and innovation, MySpace said in a statement.
The layoffs will affect all U.S. divisions and will leave MySpace with about 1,000 employees in the country.
Once the undisputed champion of social networks, MySpace has seen its growth stagnate over the past year, while Facebook surpassed it to become the most popular social-networking site in the world.
News Corp. shares fell 4.1% to $9.41.
Weak same-store sales hit Best Buy
So what was the problem with Best Buy?The company said today that its first-quarter profit fell to $153 million, or 36 cents per share, down from $179 million, or 43 cents per share, in the same quarter last year.
Excluding charges, Best Buy posted earnings of 42 cents per share -- 8 cents higher than Street expectations.
That wasn't good enough for investors, who looked at declining same-store sales as a problem. Shares fell 7.3% to $35.84.
Revenue managed to rise 12% to $10.1 billion, but that was due to opening 185 new stores over the last year.
Sales at stores open at least 14 months were down 6.2%. Sanford C. Bernstein analyst Colin McGranahan told Bloomberg News that he'd expected a decline of 2.3%.
Consumers spent less on digital cameras and appliances during what may be the biggest U.S. economic slump since the Great Depression.
Best Buy may not have benefited as much as investors hoped from the departure of Circuit City Stores, which closed its remaining 567 U.S. stores in March, McGranahan said.
Best Buy reaffirmed its full-year guidance of $2.50 to $2.90 per share.
"Domestic growth margin was up. We believe they're getting strong market share gains," Mitchell Kaiser, analyst at Piper Jaffray, told CNBC. "They're doing a better job managing inventory."
But the downside is that consumers just aren't spending, Kaiser said.
And the company is facing more intense competition from Wal-Mart. "Wal-Mart is doing a much better job on the overall product offering," Kaiser added.
In May, Wal-Mart announced plans to revamp the electronics departments in more than 3,500 U.S. stores.
Zicam shares slump on FDA warning
Shares of Matrixx Initiatives (MTXX, news, msgs) absolutely tanked today after the Food and Drug Administration said it is urging consumers to stop using the drug maker's popular Zicam products. The FDA said some people who used the zinc-based nasal spray have reported losing their sense of smell. In addition, the FDA said Matrixx must seek FDA approval to continue marketing its Zicam products.Matrixx trading was halted on the Nasdaq. When trading resumed, the stock finished off 70% to $5.78.
More from MSN Money
Telecoms downgraded
Shares of AT&T (T, news, msgs) fell 1.7% to $24.21 after Barclays Capital analysts downgraded the stock to "equal weight" from "overweight." The analyst lowered the entire telecom sector to "neutral" from "positive."Verizon Communications (VZ, news, msgs) was kept at "overweight," but the analyst lowered the price target on the stock to $34. The stock fell 0.6% to $29.54.
Research In Motion (RIMM, news, msgs) shares slipped 0.1% to $80.29 after the BlackBerry maker announced a new smartphone that will launch later this summer. The new phone, the BlackBerry Tour, will partner with Sprint (S, news, msgs) with a price tag of $199 with rebates.
Research In Motion will announce fiscal-first quarter earnings after Thursday's close.
Rival Apple (AAPL, news, msgs), which will start selling the new generation iPhone on Friday, was up 0.2% to $136.35.
Producer prices rise on energy prices
A report on wholesale prices showed that prices increased 0.2% in May, the Labor Department reported this morning. Economists had been looking for a 0.6% gain last month after a 0.3% increase in April. The Producer Price Index fell 0.5% from the same time last year, the biggest annual decline since April 1949.The core PPI, which excludes volatile food and energy prices, fell 0.1% last month. The consensus estimate was for a 0.1% gain.
The Consumer Price Index will be released on Wednesday, and prices likely fell 0.9% in May from April.
In a separate report, the Federal Reserve said industrial production fell 1.1% in May, due mostly to a big decline in the production of motor vehicles. Economists had expected a 1% drop last month. Output has tumbled 13.4% over the past year, the biggest year-over-year decline since 1946.
GM to sell Saab
General Motors (GMGMQ, news, msgs) this morning said it reached a preliminary deal to sell its Saab unit to Swedish sports car maker Koenigsegg.The sale, expected to close by the end of the third quarter of this year, includes an expected $600 million funding commitment from the European Investment Bank guaranteed by the Swedish government, the companies said in a statement.
Saab was put up for sale by the now-bankrupt GM earlier this year as part of its effort to avoid bankruptcy. Saab sold fewer than 100,000 cars last year, making up only about 1% of GM's total sales in 2008.
GM recently announced a deal to sell its Hummer brand to a Chinese manufacturing company.
In related news, Chrysler, which is also in bankruptcy, said late Monday that it will restart one of its factories -- one that makes the Dodge Viper sports car. The plant employs 115 people.
All of Chrysler's factories have been closed since May 1, the day after the company filed for bankruptcy protection.
Viper has been up for sale since last August. The car has a 600 horsepower V-10 engine and a price tag that start at about $91,000.
La-Z-Boy gives Street some comfort
La-Z-Boy (LZB, news, msgs) cheered investors with its fiscal-fourth-quarter earnings. The company said late Monday it had swung to a profit in its most recent quarter.La-Z Boy shares jumped 19.5% to $4.35.
La-Z-Boy earned $5.3 million, or 10 cents per share, in its fiscal fourth quarter, up from a loss of $4.4 million, or 9 cents per share, in the same period last year. Excluding charges, the company said it would have earned 7 cents per share in the quarter. Analysts were looking for a loss of 11 cents per share.
Sales fell 23% to $284.5 million, missing Wall Street's estimate of $297.4 million.
| Tues. | Mon. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.165% | 0.155% | 0.010 | 26.92% | 43.48% |
| 5-year Treasury note yield | 2.691% | 2.720% | -0.029 | 14.66% | 73.50% |
| 10-year Treasury note yield | 3.674% | 3.713% | -0.039 | 6.03% | 63.73% |
| 30-year Treasury bond yield | 4.503% | 4.555% | -0.052 | 3.80% | 67.34% |
| Currencies | |||||
| U.S. Dollar Index | 81.130 | 81.555 | -0.425 | 2.31% | -1.24% |
| British pound in dollars | $1.6402 | $1.6311 | 0.0091 | 1.28% | 11.32% |
| Dollar in British pounds | £0.6097 | £0.6131 | -0.0034 | -1.26% | -10.17% |
| Euro in dollars | $1.3837 | $1.3793 | 0.0044 | -2.30% | -1.23% |
| Dollar in euros | € 0.7227 | € 0.7250 | -0.0023 | 2.35% | 1.25% |
| Dollar in yen | 96.36 | 97.81 | -1.45 | 1.12% | 6.30% |
| Canadian dollar in U.S. dollars | $0.881 | $0.883 | -$0.0022 | -3.83% | 7.76% |
| U.S. dollar in Canadian dollars | $1.135 | $1.132 | $0.0036 | 3.99% | -7.20% |
| Commodities | |||||
| Gold | $932.20 | $927.50 | $4.70 | -4.91% | 5.42% |
| Copper | $2.2650 | $2.2965 | -$0.03 | 3.07% | 60.64% |
| Silver | $14.1300 | $14.0300 | $0.10 | -9.48% | 24.21% |
| Corn | $4.0400 | $4.0600 | -$0.020 | -7.39% | -0.74% |
| Crude oil (NYMEX) (per barrel) | $70.47 | $70.62 | -$0.15 | 6.27% | 58.00% |