FOX Business: The Power to Prosper
Held back by the tumbling euro, stocks landed in the red on Wednesday, backing the Dow away from levels unseen since September 2008.
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The Dow Jones Industrial Average fell 19.07 points, or 0.17%, to 11457.47, the Standard & Poor's 500 declined 6.36 points, or 0.51%, to 1235.23 and the Nasdaq Composite slid 10.50 points, or 0.40%, to 2617.22. The FOX 50 slipped 3.24 points, or 0.36%, to 885.94.
The stronger U.S. dollar versus the euro tends to have an inverse relationship with equities. The euro plunge was sparked by Moody's, which threatened to downgrade Spain's credit rating, allowing concerns about European sovereign debt to trump decent U.S. economic news.
“The European debt crisis seems to always rear its ugly head whenever we have some upward movement here. It’s uncanny,” said Jason Weisberg, NYSE floor trader and vice president at Seaport Securities.
Wall Street may also have been spooked a bit by more weakness in the Treasury market late in the day.
Just over half of the Dow's 30 members lost ground, led by Alcoa (NYSE:AA) and JPMorgan Chase (NYSE:JPM). The index's strongest performers were Caterpillar (NYSE:CAT) and Coca-Cola (NYSE:KO).
The Nasdaq Composite closed modestly lower, dragged down by tech stocks like Baidu.com (NASDAQ:BIDU) and SanDisk (NASDAQ:SNDK).
The mini selloff on Wall Street comes after the Dow closed solidly higher and at its highest level since September 2008. However, the broader markets lost most of their gains amid slumping Treasurys, marking stocks' second-straight late-day fizzle.
Some traders predicted a quiet climb on Wall Street through the end of the year.
“We’re going to see a consistent drift with an upward bias," said Weisberg. “People are pretty drained. It’s been an exhausting year."
Global worries about Europe's debt mess were bolstered after Moody's warned it may need to slash the credit rating of Spain for the second time in just three months. The credit ratings company said it is concerned about Spain's high debt level and challenging refinancing needs for 2011. The warning reignited concerns that the problems of small European nations like Greece will spread to core countries like Spain and Italy.
It also put heavy pressure on the euro, which tumbled 1.20% to $1.3220. Wall Street pays close attention to the euro's relationship with the greenback because a stronger dollar tends to hurt demand for commodities and exports.
Equity market sentiment may also have been hurt for the second day in a row by slipping bond prices as the yield on the 10-year note edged above 3.5% for the first time in seven months. While partially an endorsement of rising economic prospects, the higher bond yields also threaten to drag on economic growth and corporate profits.
Wall Street received mostly positive news on the economic front, highlighted by the Empire State manufacturing index, which soared in December to a 10.57 reading, reversing a -11.14 reading from the month before. Economists had been calling for a reading of only 5.0.
Also, the Labor Department said consumer prices grew by just 0.1% in November as the slow economy continues to keep a lid on prices. Wall Street had been expecting a slightly larger rise of 0.2%. Excluding food and energy, consumer inflation rose an in-line 0.1%. The Federal Reserve said industrial production increased 0.4% in November, its biggest gains since July. Capacity use rose to a reading of 75.2.
Meanwhile, the U.S. Senate easily passed the compromise brokered by President Barack Obama and Republican leaders to extend the Bush tax cuts by two years. The deal faces more resistance in the House but is expected to eventually pass there too. Wall Street has seen the compromise as bullish for stocks because it includes stimulative measures and removes a huge cloud of uncertainty hanging over the markets and businesses.
In the commodities complex, crude oil crude gained 34 cents a barrel, or 0.39%, to $88.62. Gold declined $18.10 a troy ounce, or 1.29%, to $1,385.50.
Novartis (NYSE:NVS) unveiled a sweetened bid to take full control of eye care giant Alcon (NYSE:ACL) for $12.9 billion. The agreement calls for Novartis to pay $168 per Alcon share for the remaining 23% of the company. To pay for the acquisition, Novartis said it will issue new stock.
BP (NYSE:BP), Transocean (NYSE:RIG) and Anadarko Petroleum (NYSE:ADK) all lost ground after the Department of Justice sued the companies and five others for alleged violations of the Clean Water Act and the Oil Pollution Act. The lawsuit is part of the U.S.'s efforts to recover billions of dollars lost from the massive Gulf of Mexico oil spill earlier this year.
General Motors (NYSE:GM) repurchased an additional $2.1 billion in preferred shares from the Treasury Department, completing the buyback of the preferred shares it issued during its bailout. GM has now paid back a total of $23.1 billion out of the $49.5 billion the U.S. invested.
Twitter raised $200 million in its latest round of funding, The Wall Street Journal’s All Things Digital blog reported.
Honeywell (NYSE:HON) sank 2% after projecting 2011 EPS of $3.50 to $3.70, compared with the Street’s view of $3.63. The manufacturer stood by its 2010 financial guidance for non-GAAP EPS of $2.98 on sales of $34 billion to $36 billion.
Simon Property Group unveiled a $4.75 billion bid to acquire the U.K.’s Capital Shopping Centres Group, but the offer was rejected amid valuation differences. The bid from Simon, the largest U.S. mall owner, represented a 7% premium to CSC’s closing price on Tuesday.
Dynegy (NYSE:DYN) reached a deal to be acquired by billionaire activist investor Carl Icahn for about $655 million. The $5.50-a-share purchase price from Icahn represents a 10% premium to Dynegy’s closing price over the last 30 trading days and 10% above Blackstone’s bid. However, the power producer, which last month had a takeover bid by private-equity giant Blackstone (NYSE:BX) blocked by Icahn and other shareholders, said it will continue to solicit superior proposals until January 24.
The U.K.'s FTSE 100 fell 0.15% to 5882.18, Germany's DAX slid 0.16% to 7016.37 and France's CAC 40 declined 0.58% to 3880.19.
In Asia, Japan's Nikkei 225 slipped 0.07% to 10309.80, Hong Kong's Hang Seng dropped 1.95% to 22975.30 and China's Shanghai Composite lost 0.54% to 2911.41.