There's No Business Like FOX Business
Wall Street slumped for a fourth straight session on Tuesday as the markets’ economic headache grew stronger after a new report revealed existing home sales took a record plunge last month to the lowest level in 15 years.
The Dow Jones Industrial Average fell 133.96 points, or 1.32%, to 10040.45, the Standard & Poor's 500 dropped 15.49 points, or 1.45%, to 1051.87 and the Nasdaq Composite sank 35.87 points, or 1.66%, to 2123.76. The FOX 50 lost 9.43 points, or 1.22%, to 763.42.
The gloomy housing data painted an even bleaker picture of the housing market than Wall Street had been bracing for and bolstered worries of a double-dip recession. Wall Street was further hurt by weaker-than-expected sales figures from medical device maker Medtronic (NYSE:MDT) and Burger King (NYSE:BKC) and sharply lower stock markets everywhere from London to Hong Kong.
The latest wave of selling landed the Dow at its weakest level since July 7, crude oil at 11-week lows and led cash to flee to the relative safety of U.S. bonds.
“I think the psychology is pretty negative at the moment. You get the sense that people are just throwing in the towel,” NYSE veteran trader Ted Weisberg of Seaport Securities told FOX Business. "There is just nothing really positive to hang your hat on out there and I think investors are just walking away, unfortunately.”
While Tuesday marked another ugly session on Wall Street, it could have been worse as the Dow was down 183 points at one point and even briefly breached the psychologically-important 10000 level before bargain-hunters came in to minimize the losses. The VIX, or the markets' so-called "fear gauge," jumped more than 10% Tuesday morning before retreating.
“It’s a very jittery market here and a market where the psychology is migrating away from risky assets,” said Craig Peckham, equity trading strategist at Jefferies & Co. “We’ve got a pretty uniform decay in most of the macro indicators that are available.”
The Nasdaq Composite came under more selling pressure than the broader markets as technology stocks like SanDisk (NASDAQ:SNDK) and Amazon.com (NASDAQ:AMZN) slumped.
Wall Street’s economic jitters were further stoked when the National Association of Realtors said existing home sales plunged by a record 27.2% in July to an annualized rate of 3.83 million units -- the weakest level since May 1995. Economists had forecasted a more modest decline to a rate of 4.7 million units, compared with June's rate of 5.26 million units. Inventories of homes for sale climbed 2.5% to 3.984 million units -- the highest level since at least 1999.
"The first time home buyers credit pulled forward demand -- by definition this is what stimulus measures achieve -- however the issue this time is that there was so little demand to be pulled forward, the credit has left no demand for the summer. The result is exactly what we’re seeing; a near, if not outright, collapse in housing," Dan Greenhaus, chief economic strategist at Miller Tabak, wrote in a note.
Housing-related stocks like Toll Brothers (NYSE:TOL) and Home Depot (NYSE:HD) took a hit in the wake of the data before recovering and economically-sensitive stocks like Foster Wheeler (NASDAQ:FWLT) and U.S. Steel (NYSE:X) closed sharply lower.
The ugly housing report marks an ominous start to this week's avalanche of economic indicators that includes new data on durable goods orders, new home sales, initial jobless claims, second-quarter gross domestic product and consumer sentiment.
Meanwhile, Wall Street received gloomy news on the earnings front. Shares of CRH (NYSE:CRH), the No. 1 asphalt producer in the U.S., tumbled 15% after it warned its earnings will likely decline 10% this year due to the tepid U.S. economic recovery. Medtronic’s sales slid by a worse-than-expected 4.1% to $3.77 billion and its non-GAAP EPS of 80 cents only met estimates. Likewise, Burger King’s EPS of 36 cents beat the Street, but its sales unexpectedly declined by 0.7%. Also, Barnes & Noble (NYSE:BKS) swung to a deeper-than-expected quarterly loss of $1.02 a share and cut its annual earnings outlook.
Underscoring the economic worries in the markets, economically-sensitive crude oil and copper tumbled. Crude slid $1.47 a barrel, or 2.01%, to $71.63 -- its lowest close since June 7. Copper dropped 1.58% a pound to $3.2395. After initially falling, gold turned positive, gaining $4.90 a troy ounce, or 0.40%, to $1,231.80.
Cash fled to the relative safety of U.S. bonds as the yield on the 10-year Treasury note touched 2.484% -- the lowest level since March 2009. In fact, an auction on Tuesday of two-year Treasury notes drew a record low yield.
Dell (NASDAQ:DELL) retreated another 3% to a 52-week low as Bloomberg News reported the technology company is preparing a sweetened bid for data-storage provider 3Par (NYSE:PAR). It's not clear how much Dell is willing to offer but it would likely have to top Hewlett-Packard's (NYSE:HPQ) $24-a-share bid that was a 33.3% premium to Dell's original offer.
Rio Tinto (NYSE:RTP) is mulling a joint bid for fertilizer maker Potash (NYSE:POT) with a Chinese partner that would rival BHP Billiton's (NYSE:BHP) $130-a-share offer that Potash already rejected as inadequate, Toronto's The Globe and Mail reported. Likewise, Mosaic (NYSE:MOS), Agrium (NYSE:AGU), Monsanto (NYSE:MON) and Cargill may also be contemplating an offer, the paper reported.
Big Lots (NYSE:BIG) posted a stronger-than-expected 37% jump in second-quarter profits and EPS of 48 cents. The closeout retailer lifted its 2010 EPS view, but its third-quarter EPS guidance of 25 cents to 29 cents would miss estimates from analysts for 31 cents.
Bank of Montreal (NYSE:BMO) slumped 6.5% after reporting weaker-than-expected EPS of C$1.13, compared with estimates for C$1.21. Profits at its brokerage wing tumbled 58% to C$130 million.
American Apparel (NYSE:APP) said in a regulatory filing it may face a delisting from the New York Stock Exchange and it is delaying filing its 10-Q quarterly filing as late as November 15. Last week the struggling retailer warned there is “substantial doubt” it can continue as a going concern, accounting-speak for staying in business.
The U.K.'s FTSE 100 dropped 1.51% to 5155.95, France's CAC 40 fell 1.75% to 3491.11 and Germany's DAX lost 1.26% to 5935.44.
In Asia, Tokyo's Nikkei 225 slid1.33% to 8995.14, Hong Kong's Hang Seng declined 1.1% to 20658.70 and China's Shanghai Composite rose 0.4% to 2650.31.