Reuters
FOX Business: The Power to Prosper
A wave of selling that began in Asia slammed into Wall Street on Tuesday, erasing almost 180 points from the Dow amid heightened fears about Europe's debt mess and China's economy overheating.
Today’s Markets
The Dow Jones Industrial Average fell 178.47 points, or 1.59%, to 11023.50, the Standard & Poor's 500 dropped 19.41 points, 1.62%, to 1178.34 and the Nasdaq Composite lost 43.98 points, or 1.75%, to 2469.84. The FOX slid 13.20 points, or 1.53%, to 848.03.
With the S&P 500 sinking for the fourth day in a row and the Dow down more than 330 points in less than a week, Wall Street clearly finds itself in a slump. In fact, Tuesday marked Wall Street's steepest decline since August 11 and the 12th largest selloff of the year.
After soaring to two-year highs amid enthusiasm for the Federal Reserve's stimulus plans and the GOP's midterm election victor, some fear has returned to the markets. In the face of some signs of hope in the U.S. economy, Wall Street has been rocked by signs China may need to hike interest rates to prevent a spike in inflation and Ireland and other deb-ridden European countries may need a bailout.
“We got to the top end of the [trading] range and now we’re going to give some back. It’s never a lot of fun. It’s actually pretty painful,” Ted Weisberg, a veteran NYSE trader at Seaport Securities, told FOX Business.
Underscoring the worry on Wall Street, the VIX, or the markets' "fear gauge," soared 14% to five-week highs.
The Dow briefly slipped below the 11000 level but managed to end above that psychologically-important level. Still, nearly all 30 Dow stocks lost ground, led by Alcoa (AA: 13.04 ,0.00 ,0.00%), Travelers (TRV: 54.67 ,0.00 ,0.00%) and Cisco Systems (CSCO: 19.48 ,0.00 ,0.00%). The index's only advancers were Home Depot (HD: 31.77 ,0.00 ,0.00%) and Wal-Mart (WMT: 54.13 ,0.00 ,0.00%).
The Nasdaq Composite slid nearly 2% as tech stocks like China's Baidu.com (BIDU: 103.52 ,0.00 ,0.00%) and Oracle (ORCL: 27.58 ,0.00 ,0.00%) lost ground.
Some market watchers predicted the storm will die down, especially because the U.S. does not rely on smaller European nations like Ireland and Greece as major trading partners.
“The good news is this is not a domestic issue. We’re not at the moment living in fear of seeing some type of domestic slowdown,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald. “Right now this is a distraction and I think it’s a buying opportunity.”
U.S. markets hit session lows after The Wall Street Journal reported European officials are weighing an 80 billion to 100 billion euro rescue for Ireland, which is the latest epicenter of the sovereign debt crisis. Euro-zone members reportedly want the U.K. and IMF to have a role in the rescue and are weighing a smaller bailout for the Irish banking sector.
The report put additional selling pressure on the euro, which dropped 0.67% to $1.3492. At the same time, Austria threatened to withhold its $258 million portion of the Greek bailout due to concerns Greece won’t meet its goals. The markets remain jittery about the developments in Europe and the implications for the euro, which tends to move along with the U.S. dollar.
“I’m very worried about it. It’s not going away any time soon. And it’s not just Ireland. This is still an interest in the PIGS,” said Peter Kenny, managing director at Knight Capital Group, alluding to the acronym for debt-ridden Portugal, Ireland, Greece and Spain.
China Spooks Markets
Wall Street's global headache began overseas on Tuesday as the Shanghai Composite tumbled 3.98% -- its second steep selloff in a week -- after the Chinese government announced new limits on foreign investment in its exploding commercial property market. That move led to further speculation that China may need to raise interest rates to combat inflation.
Global markets remain very sensitive to signs China may face slower growth because it would likely lead to a reduction in the Asian giant's huge appetite for commodities. With that in mind, commodity-related stocks like Rio Tinto (RIO: 66.30 ,0.00 ,0.00%) tumbled.
Economically-sensitive copper suffered its steepest selloff since late June, plunging 5.07% a pound to $3.7240. Crude oil slid $2.52 a barrel, or 2.97%, to $82.34. Gold dropped $30.10 a troy ounce, or 2.2%, to $1,338.30.
Wall Street had a more muted response to domestic news. Retailers reported mostly positive results, with Wal-Mart (WMT: 54.13 ,0.00 ,0.00%) and Home Depot (HD: 31.77 ,0.00 ,0.00%) either beating or meeting expectations and raising their outlooks for the rest of the year. Smaller retailers like Saks (SKS: 11.17 ,0.00 ,0.00%) and Dick's Sporting Goods (DKS: 33.51 ,0.00 ,0.00%) rallied around their results.
On the economic front, the Labor Department said its producer price index rose 0.4% in October, missing expectations for a larger rise. Excluding food and energy, prices were down 0.6% -- the biggest drop in more than four years. Economists had forecasted a rise of 0.1% for core wholesale inflation.
The Federal Reserve said industrial production in October was unchanged, compared with expectations for a rise of 0.3%. Capacity utilization was unchanged at 74.8%.
Corporate Movers
General Motors announced its Chevrolet Volt won the 2011 Motor Trend Car of the Year award, a big win for the auto maker set to go public later this week. The magazine called the vehicle, the world’s first electric vehicle with extended range capability, a "game-changer.” GM also confirmed reports that it is raising its IPO price range to $32 to $33 due to heavy demand.
Apple (AAPL: 301.50 ,0.00 ,0.00%) reached a deal with EMI to sell Beatles songs on its iTunes music store, ending the most prominent holdout from digital music. Apple said the music is now available on iTunes for $1.29 each or $12.99 an album.
Wal-Mart (WMT: 54.13 ,0.00 ,0.00%) grew its third-quarter net profits by 9.3% and reported an in-line non-GAAP profit of 90 cents a share. Revenue inched up 2.6% to $101.95 billion, trailing the Street’s view of $102.26 billion. Wal-Mart raised its full-year outlook, projecting EPS of $4.08 to $4.12, which would top consensus calls for $4.02.
Home Depot (HD: 31.77 ,0.00 ,0.00%) beat the Street with a 21% rise in third-quarter profits and EPS of 51 cents. Analysts had forecasted EPS of 48 cents. Sales increased 1.4% to $16.60 billion, basically matching the Street’s view of $16.59 billion. While it trimmed its 2010 sales guidance, Home Depot now sees 2010 EPS of $1.95, compared with forecasts for $1.90.
Dick’s Sporting Goods (DKS: 33.51 ,0.00 ,0.00%) surged 12% to 52-week highs as its non-GAAP EPS of 22 cents topped estimates by five cents. Revenue jumped 9% to $1.08 billion, exceeding forecasts. The retailer also sees stronger-than-expected fourth-quarter EPS of 69 cents to 71 cents.
Urban Outfitters (URBN: 36.59 ,0.00 ,0.00%) climbed 11% a day after the retailer forecasted its revenue would climb by 20%. Urban Outfitters also beat the Street by a penny with EPS of 43 cents. Sales rose 13% to $574 million.
Saks (SKS: 11.17 ,0.00 ,0.00%) posted a non-GAAP profit of 6 cents, doubling estimates for just 3 cents. Net sales also beat forecasts, rising 4.3% to $658.8 million. Saks was bullish on the holiday-shopping season, saying it sees same-store sales growth in the "mid-single-digit range."
Global Markets
The U.K.'s FTSE 100 lost 2.8% to 5681.90, France's CAC 40 slumped 2.63% to 3762.47 and Germany's DAX fell 1.87% to 6663.24.
In Asia, Tokyo's Nikkei 225 slipped 0.3% to 9797.10, Hong Kong's Hang Seng declined 1.4% to 23693.00 and China's Shanghai Composite plunged 3.98% to 2894.54.
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