Markets Lower, Closing News 10/25/11

Markets closed lower, breaking a three session winning streak. The Dow closed down over 200 points after investors were spooked by conservative outlook from companies reporting earnings. Concerning headlines ahead of tomorrow’s summit of European leaders to address the debt crisis and data that continues to show weakness in the U.S.economy added to the ill feelings.

Investor concern has grown ahead of tomorrow’s summit in Europe as Germany’ Chancellor Angela Merkel announced that Germany is opposed to a sentence in the deal that requires the ECB to buy troubled’ states bonds and the announcement that the statement tomorrow may not include details on the haircut investors will take or the leverage that will be used with the EFSF. Sources are also reporting that the meeting of financial ministers has been delayed, and will not take place tomorrow as has been anticipated because the details of the issues to discuss had not been finalized. The meeting was just one of three that were scheduled, and the summit of European Union as well as the Euro-zone leaders will still take place.

Consumer Confidence was reported at 39.8, lowest reading since March 2009, down from 46.4 the previous month and well below the 46.0 that was expected. The report indicates that the labor market and income concerns continue to weigh on confidence. To underscore the weakness of the labor market, the amount of respondents reporting that jobs are plentiful fell to just 3.4%, down from 5.6% in September.

The housing market got more bad news as both the home price index and Case Shiller index this morning both showed that housing prices fell. The home price index reported a  reading for August that fell 0.1% while economists were expecting a reading of +0.2%. The S&P Case Shiller Home Price Index also disappointed, reporting a-0.05% decrease despite forecasts calling for a 0.10% increase.

The Richmond Fed Manufacturing Index did not recover from September’s reading, remaining unchanged at -6 despite forecasts of a reading of +1. Shipments fell to -6 from -2 the previous month, while raw material inventories rose from 18 to 25 month over month.

Public Service Announcement- The McRib is back at McDonald’s and is available now through November 14th.  If you want the boneless rib sandwich after that, you will have to fly to Germany, the only place where it is available year round.  (Again getting my passport ready)

Market Indices/Statistics:

  • Dow closed down 207.00 pts/-1.74% to 11,706.62
  • S&P closed down 25.02 pts/-2.00% to 1,229.14
  • Nasdaq closed down 61.02 pts/-2.26% to 2,638.42
  • 29 of the 30 Dow stocks closed lower / CSCO closed higher
  • All 10 S&P 500 sectors closed lower
  • Financials was the worst performing sector (down 3.13%)
  • The VIX was up 2.78 to 32.05
  • Oil is up $1.61 to $92.89
  • Nat Gas is up $0.057 to $3.977
  • Gold is up $52.60 to $1,705.10
  • Euro vs. Dollar down $0.0028 to $1.3900
  • Dollar vs. Yen down $0.18 to $75.93

Companies in the News:

Eli Lilly & Co. traded lower (-2.02% to $37.42) after it announced this morning the withdrawal of Xigris following recent clinical trial results. As a result of the withdrawal, management now sees FY earnings per share $4.30-4.35, $0.05 lower than it had previously guided, in-line with the $4.33 expected by analysts.

Shares of ArcelorMittal were under pressure today (-3.34% to $19.41) after the announcement that it has dropped it interest in a bid for Macarthur coal, saying it was more appropriate to focus on their own business, and that it has sold its current stake in Macarthur to Peamcoal. 

UBS traded slightly lower (-0.16% to $12.57) after the Financial Industry Regulatory Authority announced it has settled a claim with UBS, which did not admit any wrongdoing, related to failure to properly supervise the short sales of securities. As a condition of the settlement UBS was fined $12 million.

Earnings:

MF Global Holdings slid in today’s session (-47.61% to $1.86) after reporting an adjusted Q2 loss of $0.09 per share vs. analysts’ consensus of a $0.05 profit per share.  Shares were also under pressure following a Moody’s rating cut because of MF’s exposure to European debt.

3M traded lower (-6.25% to $77.04) after reporting Q3 earnings before the market opened.  3M reported earnings per share of $1.52 on sales of $7.5 billion, below analysts’ consensus of $1.61 per share and $7.78 billion in sales. Investors were also bearish on 3M today after management cut their FY EPS view from $6.10-6.25 per share to $5.85-5.95 per share.

Office Depot closed down 9.84% to $2.29 after reporting Q3 adjusted earnings per share of $0.00 on revenue of $2.8 billion, in-line with expectations. Shares traded lower because same-store sales were down 2% for the quarter.

US Steel reported adjusted earnings per share of $0.72 excluding items for Q3, but shares traded lower today (-9.57% to $22.40) because of management’s outlook moving forward. CFO Gretchen Haggerty said that steel buyers are expected to be cautious for the fourth quarter, and CEO John Surma Jr. said he anticipated the demand from the construction industry will continue to be very slow.

Coming Wednesday:

Economic Reports:Durable Goods (expected to be -1.0%) at 8:30am and New Home Sales (expected to be 300k) at 10:00 am; Earnings from Aflac, Avery Dennison, ConoccoPhillips, Hess Corp, Sprint, and Visa