Published December 12, 2011
FOX Business: The Power to Prosper
A round of gloomy headlines from both sides of the Atlantic ignited a broad selloff on Wall Street.
As of 3:40 p.m. ET, the Dow Jones Industrial Average slid 162 points, or 1.3%, to 12,021, the S&P 500 dipped 18.1 points, or 1.5%, to 1,237 and the Nasdaq Composite fell 35.4 points, or 1.4%, to 2,611.
Every major sector was to the downside on Monday. Some of the biggest losses were seen in the energy and basic materials sectors following big losses in respective futures markets. Financials were also under pressure amid continued worries over Europe's debt debacle.
McDonald's (MCD) offered a rare glimmer of light in an otherwise gloomy day. The fast-food giant's stock touched a record high for the fourth-straight day, according to data compiled by FOX Business.
Investors moved into U.S. government debt, pushing yields lower. The benchmark 10-year Treasury yields 1.998% from 2.07%. Meanwhile, volatility jumped 5% as tracked by the CBOE's VIX.
Intel (INTC) cut its fourth-quarter revenue guidance as a result of hard drive shortages. The chip maker said it now expects sales of $13.7 billion from a prior estimate of $14.7 billion. Intel also cuts its gross margin expectations, a key profitability metric, to 64.5% from 65%.
Also on the corporate front, Jefferies (JEF) plans on cutting 11% of its workforce amid turmoil in its stock price, according to FOX Business' Charlie Gasparino. The investment bank's shares have fallen some 53% so far this year amid worries over its exposure to European sovereign debt, something the company has repeatedly defended.
Pfizer (PFE) unveiled plans to boost its dividend by 10% and create a $10 billion share repurchase program.
Selloff in Commodities Markets
In metals, gold dropped $48.60, or 2.8%, to $1,668 a troy ounce. Silver slid $1.24, or 3.9%, to $30.94 a troy ounce.
Energy markets were in the red, tracking equities and a stronger dollar. The benchmark crude oil contract traded in New York fell $1.64, or 1.7%, to $97.77 a barrel. Wholesale RBOB gasoline slumped 1.3% to $2.564 a gallon.
European Worries Linger
Headlines on the eurozone's debt crisis captivated the markets last week, and appear poised to do the same on Monday as well.
Every European Union country besides Great Britain agreed on Friday to a fiscal union that would help keep public debt in check, and help to avoid a repeat of the debt crisis that has stricken the bloc.
The hope was that if European leaders made such an agreement, the politically-independent European Central Bank might step in to buy eurozone sovereign debt, knocking borrowing costs down from painful levels. Such a move hasn't been explicitly signaled of yet, and debt yields remain elevated.
"The outlook for the euro is hardly any better than it was on Friday," Chris Beauchamp, a market analyst at London-based IG Index wrote in an e-mail. Beauchamp notes there is considerable risk that investors could begin fleeing from beleaguered eurozone debt once again, which would send yields climbing.
The benchmark 10-year Italian bond yield climbed 14 basis points above the closely-watched 7% mark. The premium investors demand to hold Italian debt as opposed to safe-haven German bunds also topped 5% in a sign of the worries.
However, in what was seen as a relatively positive sign, the country sold 7 billion euro in one-year bonds at a yield of 5.92%, down from a record 6.087% in November.
Meanwhile, Moody's Investor Service said Monday it may downgrade certain EU countries in the coming month as the debt crisis continues posing a risk to many countries. Echoing those comments, Fitch said the summit last week did little to ease pressures on European sovereign debt, and noted the region may be in for a "significant economic downturn."
The moves follows Standard & Poor's, which put 15 eurozone countries on watch for a downgrade last week.
The euro tumbled 1.2% to $1.3212 -- the lowest level since early October. European blue chips slid 3.1%. The U.S. dollar jumped 0.67% against a basket of six world currencies.
The main economic report on the docket comes on Monday afternoon. The U.S. budget deficit is forecast to have fallen to $139.5 billion in November from $150.4 billion in the same month last year.
European blue chips slid 3.1%, the English FTSE 100 fell 1.8% to 5,428 and the German DAX dipped 3.4% to 5,785.
In Asia, the Japanese Nikkei 225 jumped 1.4% to 8,654 and the Chinese Hang Seng slid 1% to 2,478.