Stocks sharply lower on weak earnings from some big-name companies
The Associated Press
Published Tuesday, October 23, 2012 6:33AM EDT
Last Updated Tuesday, October 23, 2012 11:40AM EDT
NEW YORK -- Stocks opened sharply lower Tuesday, driving major indexes to their lowest point since early September, after big-name companies reported weak quarterly earnings and lowered their expectations for the rest of the year.
The Dow Jones industrial average sank 245 points, or 1.8 per cent, to 13,100 in the first hour of trading. The Standard & Poor's 500 index fell 24 points to 1,409. The Nasdaq composite index was off 39 points at 2,977.
The day was shaping up to be among the worst of the year on Wall Street. The Dow's biggest decline was 274 points, on June 1.
3M, which makes everything from Scotch tape to coatings for LCD screens and is an economic bellwether, reduced its profit expectations for this year because of "current economic realities."
Chemical maker DuPont said it will cut 1,500 jobs and take other steps to increase competitiveness after earnings fell sharply last quarter. UPS reported lower earnings and said it was uncertain about the holiday shopping season.
Xerox plunged 8 per cent, or 56 cents, to $6.47. Xerox's income dropped 12 per cent in the third quarter following steep declines in sales for equipment, supplies and related products. The stock is off 19 per cent so far this year.
Some of the disappointing revenue is because of weakness in foreign markets. Multinational companies are having a hard time selling to Europe, which is struggling under a debt crisis and a spreading recession.
The red-hot growth enjoyed by emerging markets like China and India is also slowing, and many businesses that had relied on growth there to offset weak U.S. consumer demand are being forced to come up with new strategies.
"The recession in Europe is very real," said Bernard Schoenfeld, senior investment strategist for Bank of New York Mellon Wealth Management in New York. "It's not going to disappear very quickly, and it will certainly negatively affect earnings of exporters in the United States."
Financial analysts have predicted that earnings for S&P 500 companies for July through September would be lower than the year before, breaking a three-year winning streak.
There was more bad news on manufacturing Tuesday from one of the regional branches of the Federal Reserve.
The Federal Reserve Bank of Richmond, Va., reported that manufacturing in the central Atlantic region "pulled back" in October following a slight improvement the month before. Manufacturers were also less optimistic about the next six months.
The price of crude oil fell $2.41 per barrel to $86.24. And as investors sold stocks, they bought bonds, driving yields lower. The yield on the benchmark 10-year U.S. Treasury note sank to 1.76 per cent from 1.82 per cent Monday.
Among individual stocks, 3M and DuPont were among the worst performers. DuPont plunged $4.15, or 8.3 per cent, to $45.61. 3M was down $2.37, or 2.6 per cent, at $90.16.
Apple fell $6 to $628 ahead of the expected release of a smaller version of its iPad. Apple has the most sway among stocks in the S&P 500 and the Nasdaq composite and helped drive those indexes lower.
Materials stocks and energy companies fell the most in the broader market, each losing more than 2 per cent.
Among other stocks making news:
- Xerox plunged 56 cents, or 8 per cent, to $6.47. Xerox's income dropped 12 percent in the third quarter following steep declines in sales for equipment, supplies and related products. The stock is off 19 per cent so far this year.
- Yahoo jumped 80 cents, or 5 per cent, to $16.57, making it one of the handful of winners in the S&P 500. The company's first earnings report under Marissa Mayer as CEO easily beat the forecasts of Wall Street analysts. Yahoo hired Mayer from Google in July to orchestrate its latest turnaround attempt.