Markets Lower,Closing News 9/22/11

Markets closed lower today, continuing yesterday’s decline after the Fed announced Operation Twist and gave a pessimistic outlook citing the significant downside risk for the US and global economy. Markets were also under pressure because of concerns of economic slowdown in Europe and China. From 2:20pm yesterday (when the Fed statement was published) through today’s close, the Dow lost over 660 points (5.8%).

The U.S. dollar rallied today against the Euro, with the Euro falling to $1.3473 (-0.76%).  As a result of today’s dollar strength, oil fell over 6.75% to $80.07, and gold fell 4.09% to $1,734. As a result, Materials and Energy were the two weakest sectors in the S&P, down 5.69% and 5.30% respectively.

The preliminary reading of the HSBC China Manufacturing Purchasing Managers Index fell 0.5 points to 49.4 in September from a reading of 49.9 in August. The reading indicates the third straight month of a reading under 50, indicating contraction.

The Eurozone also released PMI data today, as the Eurozone September Flash Services Purchasing Managers Index fell to 49.1 from 51.4 in August. Economists had been forecasting a reading of 51.0.

The Financial Times is reporting that 16 European banks came close to failing the latest round of stress tests. According to a senior French official, those banks would have to seek new funds immediately, and European officials are trying to speed up potential recapitalization plans. Of the 16 banks, seven are from Spain, two from Germany, two from Greece, two from Portugal, and one from Italy, Cyprus, and Slovenia.

Jobless claims fell 9k last week, down to 423k from an upwardly revised 432k for the week of September 10. Jobless claims were above 400k, the level where the economy sheds more jobs than it creates for the 23rd of the last 24 weeks.

On a little bit of a brighter note, the Yankees swept both games of their double-header yesterday, clinching their 17th American League East title, and setting them up to make a run for their unprecedented 28th World Series title.

Market Indices/Statistics:

  • Dow closed down 391.01 pts/-3.51% to 10,733.83
  • S&P closed down 37.20 pts/-3.19% to 1,129.56
  • Nasdaq closed down 82.52 pts/-3.25% to 2,455.67
  • All 30 Dow stocks closed lower
  • All 10 S&P 500 sectors closed lower
  • Materials was the worst performing sector (-5.50%)
  • The VIX was up 4.03 points to 41.35
  • Oil is down $5.74 to $80.09
  • Nat Gas is down $0.032 to $3.788
  • Gold is down $71.70 to $1,736.40
  • Euro vs. Dollar down $0.0104 to $1.3474
  • Dollar vs. Yen down $0.17 to $76.27

Companies in the News:

United Technologies Corp. and Goodrich Corporation announced an agreement under which United Technologies will acquire Goodrich in an all cash deal valued at $18.4 billion in cash, or $127.50 per share. Shares of UTX traded 8.76% lower to $68.31, while Goodrich was one of the few S&P 500 companies in positive territory today, up 10.15% to $120.60.

Education Realty Trust Inc. announced it has completed the purchase of University Village Towers, a housing community adjacent to UC Riverside, in Riverside California. Shares of EDR fell 2.08% to $8.95 in today’s session.

The Mosaic Company traded lower (-5.47% to $60.11) after announcing a proposed offering of 18 million shares of common stock in conjunction with Mosaic’s inclusion in the S&P 500 index.

Earnings:

Shares of FedEx fell today (-8.17% to $66.58) after reporting Q1 earnings before the opening bell this morning. FedEx reported Q1 earnings per share of $1.46 on $10.52 billion compared to analysts’ forecasts of $1.45 per share on $10.32 billion in revenue. Shares were under pressure because of the slowdown in global trade, and decline demand in Asia.

Rite Aid Corp. also reported earnings this morning, reporting a Q2 loss per share of $0.11, narrower than the $0.17 loss per share that analysts forecasted. Q2 revenue was also higher than expected, reported at $6.3 billion vs. $6.23 billion.  Shares of RAD traded 4.67% lower to $1.02 in today’s session.

Discover Financial Services also beat analysts’ forecasts this morning, reporting Q3 earnings per share of $1.18 vs. estimates of $0.96 per share. The CFO, Mark Graf, said on the conference call that credit card pricing has returned to normal, and that Discover will enjoy funding tailwind going into 2012. Shares of DFS were only down 0.36% to $25.25 on a day when the Dow was down over 3.5%.

Coming Friday:

Economic Reports: None;  Earnings from AZZ Inc. and KB Homes