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Dark day for the Dow
MarketWatch
U.S. stocks plunge to worst 1-day drop since 2001
Tuesday February 27, 4:25 pm ET
By Nick Godt
NEW YORK (MarketWatch) -- U.S. stocks plunged to their worst one-day performance since 2001 on Tuesday, with the Dow Jones Industrial Average dropping 200 points in one minute around 3 p.m. before recovering some ground by the close, after a sell-off in China fueled concerns about growth.
Concerns that tighter credit conditions in China and Japan might dampen global growth first sent Shanghai sliding 9% overnight before the sell-off spread to other markets.
The Dow Jones Industrial Average (DJI:^DJI - News) fell 415 points, or 3.3%, to close at 12,216, its worst one-day drop since September 2001.
Following weakness last week, the blue-chip average has now erased all its gains for the year so far.
After sliding all day, U.S. stocks seemed to fall off a cliff in the afternoon, as data providers failed to keep up with selling programs, noted Stephen Sachs, head of trading at Rydex Investments.
"There's not even a flight to quality into gold or the Swiss franc, which tells me that we're closer to the beginning than to the end of this," Sachs said.
The VIX, a gauge of market volatility, spiked 70% on Tuesday "which could cause a lot of serious pain" among investors who'd been betting on quiet waters since last summer, he said.
The Dow earlier fell by over 500-point, weighed by steep declines in shares of Alcoa Inc. (NYSE AA - News) , Caterpillar Inc. (NYSE CAT - News) , General Motors Corp. (NYSE GM - News) , Verizon Corp. (NYSE VZ - News) and Walt Disney Co. (NYSE DIS - News) .
U.S. stocks, "have been way, way overdue for a correction," said Barry Ritholtz, chief market strategist at Ritholtz Research & Analytics. The market has been weakening since last week amid concerns about subprime mortgages and waning economic growth, he noted.
Trading volumes hit record levels on the New York Stock Exchange, where more than 2.3 billion shares exchanged hands. Over 3 billion shares traded on the tech-heavy Nasdaq stock market.
Declining issues outpaced gainers by 29 to 4 on the NYSE and by 14 to 1 on the Nasdaq.
The S&P 500 index dropped 50 points, or 3.5%, to 1,399, while the technology-heavy Nasdaq Composite (COMP - News) took the brunt of the selling, falling 96 points, or 3.9%, to 2,407.
"Whether it's contained to today or if it's the beginning of a more serious correction, we'll have to see over the next couple of days," said Paul Nolte, director of investments at Hinsdale Associates.
A steeper-than-expected drop in durable goods orders in January also fueled concerns about growth, offsetting better-than-expected existing homes sales and a rise in consumer confidence. See Durable Goods report.
Investors are also bracing for Wednesday's revision to the fourth-quarter GDP, which is expected to show growth revised down to 2% from 3.5% previously.
"There is a fundamental slowdown of the economy, which investors have ignored for too long," said Ritholtz.
Weakness in tech shares also hit blue-chips Intel Corp. (NasdaqGS:INTC - News) , Hewlett-Packard Co. (NYSE:HPQ - News) and IBM (NYSE:IBM - News) .
Also weighing on techs, Apple Inc. (NasdaqGS:AAPL - News) fell 5.3% after announcing a delay in the launch of Apple TV. And Xerox Corp. (NYSE:XRX - News) dropped 3.8%, after the company lowered its earnings guidance due to restructuring charges.
By sector, gold (Philadelphia:^XAU - News) , financials (Nasdaq:^IXFN - News) and real-estate investment trusts (Chicago Options:^DJR - News) led the declines, while only individual stocks were to be found in the green.
Among those, Brocade Communications (NasdaqGS:BRCD - News) rose 5% after posting better-than-expected earnings. And CBS Corp. (NYSE:CBS - News) rose 0.6% after it swung to a fourth-quarter profit, slightly above analysts expectations.
Among Dow components, Wal-Mart Stores Inc. (NYSE:WMT - News) fell 3.6% after it agreed to acquire 35% of Trust-Mart, a Taiwanese-owned operator of hypermarkets in China. The world's largest retailer has reportedly agreed to pay around $1 billion for the stake.
And General Electric (NYSE:GE - News) , which earlier was the only Dow stock bucking the downward trend, fell 1.9% after being upgraded to buy from hold at UBS.
China slide spreads wide
Futures fell sharply before the open as investors weighed a 9% plunge in China's leading stock index overnight. The slide - the biggest in China in a decade - came amid concerns of more economic tightening measures, as China's parliament prepares for its annual session next week.
Access to easy money across the globe has been credited for boosting economic growth and fueling demand for assets such as stocks and bonds. The surge in private-equity deals, such as Monday's $45 billion offer for TXU Corp. (NYSE:TXU - News) , has also been made possible by friendly financing conditions.
Continued jitters about the U.S. housing market - and especially the distressed subprime mortgage market - also provided ammunitions for the bears. Tightening credit conditions in the U.S. could worsen the downturn in the housing market and slow economic growth further.
On Tuesday, Freddie Mac (NYSE:FRE - News) , one of the largest providers of mortgages in the nation -- said it was tightening its lending standards to subprime markets, where borrowers have less than perfect credit ratings.
Investors mull long-awaited correction
On Monday, stocks closed lower as concerns about growth resurfaced, marking the first four-session losing streak for the broad S&P 500 index since August of 2006. The move sparked concern that the market may be poised for a much-awaited pull-back after an uninterrupted run since July 2006.
"The S&P will be on the mind of technicians, especially if we get a couple of sharp pull-backs like today," said Avalon's Cardillo.
Global jitters
Adding fuel to global jitters on Tuesday, Iran's foreign minister reportedly said Tuesday that the country would never again suspend its uranium-enrichment program.
Meanwhile in Afghanistan, a suicide bomber reportedly killed at least 23 people near the main U.S. military base where U.S. Vice-President Dick Cheney was visiting.
Bonds rallied on safe-haven flows amid the global jitters and worries about growth. The benchmark 10-year Treasury bond was up 30/32 at 100 29/32 in price, while its yield, which moves inversely, fell to 4.515%, more than a two-month low. See Bonds.
The yen rallied sharply against the dollar early Tuesday, gaining more than 1% as traders moved to unwind carry trades. See Currencies.
Crude oil climbed ahead of weekly inventory data and amid concerns over Iran's nuclear program. The April crude futures contract rose 7 cents to $61.46 a barrel in electronic trading. See Futures Movers.
Gold slumped. Gold for current April delivery fell $2.60 to $687.20 an ounce. See Metals Stocks.
Want to know more about the market? FREE membership at MarketWatch includes advanced charting, portfolio tracking, email alerts and e-newsletters with expert tips and commentary. Join MarketWatch TODAY!
http://biz.yahoo.com/cbsm-top/070227/f22e4630baad29bd4d6c044dfc3359fa.html
MarketWatch
U.S. stocks plunge to worst 1-day drop since 2001
Tuesday February 27, 4:25 pm ET
By Nick Godt
NEW YORK (MarketWatch) -- U.S. stocks plunged to their worst one-day performance since 2001 on Tuesday, with the Dow Jones Industrial Average dropping 200 points in one minute around 3 p.m. before recovering some ground by the close, after a sell-off in China fueled concerns about growth.
Concerns that tighter credit conditions in China and Japan might dampen global growth first sent Shanghai sliding 9% overnight before the sell-off spread to other markets.
The Dow Jones Industrial Average (DJI:^DJI - News) fell 415 points, or 3.3%, to close at 12,216, its worst one-day drop since September 2001.
Following weakness last week, the blue-chip average has now erased all its gains for the year so far.
After sliding all day, U.S. stocks seemed to fall off a cliff in the afternoon, as data providers failed to keep up with selling programs, noted Stephen Sachs, head of trading at Rydex Investments.
"There's not even a flight to quality into gold or the Swiss franc, which tells me that we're closer to the beginning than to the end of this," Sachs said.
The VIX, a gauge of market volatility, spiked 70% on Tuesday "which could cause a lot of serious pain" among investors who'd been betting on quiet waters since last summer, he said.
The Dow earlier fell by over 500-point, weighed by steep declines in shares of Alcoa Inc. (NYSE AA - News) , Caterpillar Inc. (NYSE CAT - News) , General Motors Corp. (NYSE GM - News) , Verizon Corp. (NYSE VZ - News) and Walt Disney Co. (NYSE DIS - News) .
U.S. stocks, "have been way, way overdue for a correction," said Barry Ritholtz, chief market strategist at Ritholtz Research & Analytics. The market has been weakening since last week amid concerns about subprime mortgages and waning economic growth, he noted.
Trading volumes hit record levels on the New York Stock Exchange, where more than 2.3 billion shares exchanged hands. Over 3 billion shares traded on the tech-heavy Nasdaq stock market.
Declining issues outpaced gainers by 29 to 4 on the NYSE and by 14 to 1 on the Nasdaq.
The S&P 500 index dropped 50 points, or 3.5%, to 1,399, while the technology-heavy Nasdaq Composite (COMP - News) took the brunt of the selling, falling 96 points, or 3.9%, to 2,407.
"Whether it's contained to today or if it's the beginning of a more serious correction, we'll have to see over the next couple of days," said Paul Nolte, director of investments at Hinsdale Associates.
A steeper-than-expected drop in durable goods orders in January also fueled concerns about growth, offsetting better-than-expected existing homes sales and a rise in consumer confidence. See Durable Goods report.
Investors are also bracing for Wednesday's revision to the fourth-quarter GDP, which is expected to show growth revised down to 2% from 3.5% previously.
"There is a fundamental slowdown of the economy, which investors have ignored for too long," said Ritholtz.
Weakness in tech shares also hit blue-chips Intel Corp. (NasdaqGS:INTC - News) , Hewlett-Packard Co. (NYSE:HPQ - News) and IBM (NYSE:IBM - News) .
Also weighing on techs, Apple Inc. (NasdaqGS:AAPL - News) fell 5.3% after announcing a delay in the launch of Apple TV. And Xerox Corp. (NYSE:XRX - News) dropped 3.8%, after the company lowered its earnings guidance due to restructuring charges.
By sector, gold (Philadelphia:^XAU - News) , financials (Nasdaq:^IXFN - News) and real-estate investment trusts (Chicago Options:^DJR - News) led the declines, while only individual stocks were to be found in the green.
Among those, Brocade Communications (NasdaqGS:BRCD - News) rose 5% after posting better-than-expected earnings. And CBS Corp. (NYSE:CBS - News) rose 0.6% after it swung to a fourth-quarter profit, slightly above analysts expectations.
Among Dow components, Wal-Mart Stores Inc. (NYSE:WMT - News) fell 3.6% after it agreed to acquire 35% of Trust-Mart, a Taiwanese-owned operator of hypermarkets in China. The world's largest retailer has reportedly agreed to pay around $1 billion for the stake.
And General Electric (NYSE:GE - News) , which earlier was the only Dow stock bucking the downward trend, fell 1.9% after being upgraded to buy from hold at UBS.
China slide spreads wide
Futures fell sharply before the open as investors weighed a 9% plunge in China's leading stock index overnight. The slide - the biggest in China in a decade - came amid concerns of more economic tightening measures, as China's parliament prepares for its annual session next week.
Access to easy money across the globe has been credited for boosting economic growth and fueling demand for assets such as stocks and bonds. The surge in private-equity deals, such as Monday's $45 billion offer for TXU Corp. (NYSE:TXU - News) , has also been made possible by friendly financing conditions.
Continued jitters about the U.S. housing market - and especially the distressed subprime mortgage market - also provided ammunitions for the bears. Tightening credit conditions in the U.S. could worsen the downturn in the housing market and slow economic growth further.
On Tuesday, Freddie Mac (NYSE:FRE - News) , one of the largest providers of mortgages in the nation -- said it was tightening its lending standards to subprime markets, where borrowers have less than perfect credit ratings.
Investors mull long-awaited correction
On Monday, stocks closed lower as concerns about growth resurfaced, marking the first four-session losing streak for the broad S&P 500 index since August of 2006. The move sparked concern that the market may be poised for a much-awaited pull-back after an uninterrupted run since July 2006.
"The S&P will be on the mind of technicians, especially if we get a couple of sharp pull-backs like today," said Avalon's Cardillo.
Global jitters
Adding fuel to global jitters on Tuesday, Iran's foreign minister reportedly said Tuesday that the country would never again suspend its uranium-enrichment program.
Meanwhile in Afghanistan, a suicide bomber reportedly killed at least 23 people near the main U.S. military base where U.S. Vice-President Dick Cheney was visiting.
Bonds rallied on safe-haven flows amid the global jitters and worries about growth. The benchmark 10-year Treasury bond was up 30/32 at 100 29/32 in price, while its yield, which moves inversely, fell to 4.515%, more than a two-month low. See Bonds.
The yen rallied sharply against the dollar early Tuesday, gaining more than 1% as traders moved to unwind carry trades. See Currencies.
Crude oil climbed ahead of weekly inventory data and amid concerns over Iran's nuclear program. The April crude futures contract rose 7 cents to $61.46 a barrel in electronic trading. See Futures Movers.
Gold slumped. Gold for current April delivery fell $2.60 to $687.20 an ounce. See Metals Stocks.
Want to know more about the market? FREE membership at MarketWatch includes advanced charting, portfolio tracking, email alerts and e-newsletters with expert tips and commentary. Join MarketWatch TODAY!
http://biz.yahoo.com/cbsm-top/070227/f22e4630baad29bd4d6c044dfc3359fa.html
