Wall Street Surrender Gains
Stocks on Wall Street ended the session sharply lower, with the Dow
closing down 280 points erasing nearly all of the gains posted in the
previous session. Weakness in the financial sector sent the markets
lower on negative news on Lehman Brothers.
The
major averages which fell further in the final hour of the session,
closed at their worst levels of the day. The Dow closed down 280.01
points or 2.4% at 11,230.73, the Nasdaq closed down 59.95 points or
2.6% at 2,209.81 and the S&P 500 closed down 43.28 points or 3.4%
at 1,224.51, marking the largest one day percent decline since February
2007.
Weakness was broad-based, 91% of the S&P 500 components
posted a loss and all ten of the economic sectors settled in negative
territory. Volume was on the heavy side, with 1.7 billion shares
exchanging hands on the NYSE.
If we look sector wise the
financial sector, which fell by 6.6%, acted as the main drag on the
market, with Lehman Brothers sparking much of the selling interest.
Lehman Brothers plunged 45% as traders speculated about the firm's
capital position after reports indicated that a state-run Korean bank
is no longer in talks to buy some or all of Lehman. However, Reuters
said that a Korean official denied the reports. Shares of Lehman
Brothers fell further after Standard & Poor?s put the investment
bank?s credit ratings on Credit Watch with negative implications.
S&P stated that the drop in Lehman?s stock could hinder the
company?s ability to raise capital.
The energy sector plunged by
6.4% got clipped as energy commodities fell 3.6%. The losses came on
expectations that Hurricane Ike would spare production in the Gulf of
Mexico and OPEC would leave its oil output unchanged. Crude prices fell
a steep 4.2% to $101.87 per barrel, which is the lowest level since
April.
Adding to the selling pressure, the National Association
of Realtors released a key report on pending home sales. In the report,
the NAR said that that pending home sales fell by 3.2% in July
following an upwardly revised 5.8% increase in June. Pending sales fell
7.5% in the Northeast and 10.6% in the West, while the Midwest was up
2.8% and the South was flat. Hurt by the disappointing report on
pending home sales, housing stocks showed considerable weakness as
well. The Philadelphia Housing Index fell 6.9 percent, reversing the
gain posted in the previous session.
Going in detail index wise,
the majority of the Dow Jones stocks ended the session with notable
losses, sending the blue chip index sharply lower. Of the 30 stocks
that make up the Dow, only 5 ended the session with gains.
AIG
led the Dow lower on fears that the company?s exposure to the mortgage
markets may force the company to raise fresh capital. Shares of the
insurer ended the day down 19.3 percent. With the decline, the stock
gave back all of the gains posted in the previous two sessions, closing
at its worst level in well over ten years.
Other financial stocks
inside the Dow closed sharply lower as well, including Citigroup, Bank
of America and JP Morgan Chase. Citigroup closed down 7.1%, Bank of
America closed down 6.4% and JP Morgan Chase closed down 5%.
Reversing
most of a gain posted in the previous session, American Express also
saw significant selling pressure. Shares of the credit card issuer fell
5.6%, although they remain in a nearly two-week trading range.
Amid
fears a global economic slowdown, Caterpillar posted a substantial loss
as well. The construction equipment manufacturer ended the session 5
percent lower, extending a recent downtrend. With the decline, the
stock closed at its worst level in well over a year.
Pfizer,
Exxon Mobil and Home Depot also showed considerable weakness. Pfizer
ended the session 4.7 percent lower on news that it will withdraw all
marketing applications globally for its skin treatment drug
dalbavancin. Exxon Mobil closed down 4.6 percent, compared to a 3.4
percent decline by Home Depot.
On the other hand, Coca Cola ended
the session with a notable gain. Shares of the beverage maker closed up
0.9%, extending a recent up trend. McDonald?s also ended the day
sharply higher. The stock saw a gain of 1.2%, adding to gains posted in
the past two sessions. Earlier in the day, the company reported 8.5%
growth in its global comparable sales for the month of August, helped
by its popular breakfast menu, Olympic-related marketing, and extended
hours.
In Commodity market, the gold closed lower for a seventh
straight session, hurt by a stronger dollar and lower crude oil prices.
December gold ended down $10.50 at $792 an ounce, its lowest closing
mark of 2008. Gold touched as low as $780.20 an ounce earlier in the
day.
The Crude-oil futures dropped almost 3% to close at their
lowest level since April as concerns waned over potential damage to
energy infrastructure in the Gulf of Mexico from Hurricane Ike, and
comments from a key oil producers' meeting in Vienna indicated a likely
decision to leave output quotas unchanged. Crude for October delivery
fell $3.08, or 2.9%, to close at $103.26 a barrel on the New York
Mercantile Exchange. It dropped as far as $103.15 during the session to
mark a fresh five-month low. Prices extended their decline into
electronic trading evening to drop below $102 per barrel.
Earlier
on the day, the stock markets across the Asian region closed sharply
lower, as traders did some profit taking following Monday's rally. The
Japanese Nikkei 225 average closed down 1.8%. Hang Seng China
Enterprises tracked Shanghai stocks lost 2.79% to 10,825.25 while the
benchmark Hang Seng index closed down 1.46% at 20,491.1. The BSE Sensex
declined 0.41% to 14,883.4.
The major European markets also ended
the session lower after trading in a mixed fashion earlier in the day.
The French CAC 40 Index closed down 1.1%, while the German DAX Index
ended the session 0.5% lower. The U.K?s FTSE 100 Index finished the day
down 0.6%.
Looking ahead the economic calendar features the
Mortgage Bankers Association weekly report on mortgage applications,
which will be followed by the Energy Information Administration weekly
data on crude oil inventories.
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