Stocks Hit By Late Selloff, Closing Near Worst Levels of Day
Stocks were hit by another late-session selloff as investors remained jittery after the market's worst week in four years.
After several failed attempts to rally, the Dow Jones Industrial Average ended near the lows for the day. The S&P 500 fell modestly while the Nasdaq declined about 1%.
"I think it's just indicative of what the market is going to look like for the next couple of weeks, it's going to be very choppy," Dan McMahon, head of listed trading at CIBC World Markets, told CNBC.com.
McMahon said he expects "lots of volatility" this week with investors selling into strength. "It's going to be up and down, there's not going to be any one particular trend," he said.
Joe Battipaglia, chief investment officer at Ryan Beck, told CNBC.com that the market's overall momentum remains to the downside as investors continue to move out of riskier stocks and into shares of safer large-cap companies.
More Aggressive Shifting
"That shifting is going on much more aggressively now," said Battipaglia. "Last week's market moves were swift and institutionally driven; you're getting a wider response from retail investors this week."
Jeffrey Saut, chief investment strategist at Raymond James, said the markets may be on the cusp of a relief rally which should last three days or more.
"This is a typical pattern in a bottom sequence. Typically, you'll get a three- to five-day throwback rally then you come back down," Saut told CNBC.com. "How the markets will act in that pullback will tell you a lot about what's ahead. This week and the first part of next week are pretty crucial."
Breadth was overwhelmingly negative on Monday with decliners outpacing gainers by a five-to-one ratio on the New York Stock Exchange. All ten S&P 500 sectors closed lower but tech stocks showed moderate strength in a down day. The telecom sector was the day's worst performing sector with financial stocks not far behind.
Shares of New Century Financial plunged after the subprime mortgage lender said it is facing a probe into its accounting and stock trading. Shares of peers Accredited Home Lenders and Impac Mortgage Holdings also traded sharply lower.
Homebuilding stocks also suffered big declines on Monday with the largest losses from Meritage Homes, which fell 9.4%, and Beazer Homes, down 7.8%.
Chipmaker Advanced Micro Devices said this morning it is unlikely to meet first-quarter sales targets of $1.6 to $1.7 billion. AMD shares declined to a new 52-week low on the news while shares of rival Intel rose slightly.
Credit Suisse said the revenue shortfall is likely due to the ongoing pricing war between AMD and Intel. "Barring any changes in strategy by either company, we think there is a high likelihood of similar announcements in the future," Credit Suisse analyst Michael Masdea wrote in a research report.
Research in Motion shares declined after the company said its chairman and co-CEO is stepping aside as chairman, plans to restate results and is reducing earnings by up to $250 million dating to fiscal 2004 because of incorrect dates over stock option grants.
In the commodities markets, light crude futures closed just above $60 a barrel on the New York Mercantile Exchange while gold futures fell to six-week lows and is now showing a loss for the year.
This morning, St. Louis Fed President William Poole attempted to soothe investors saying he didn't see a recession on the horizon but said it would take a stock market drop of crash of 1987-like proportions to justify Fed intervention.
On the economic front, growth in the U.S. service sector fell in February, the Institute for Supply Management announced Monday morning. The ISM index declined to 54.3, which was below the consensus estimate of 57.2.
Stocks In Europe, Asia Close Lower
In Europe, London's FTSE-100, the ParisCAC-40 and the Frankfurt DAX all closed lower.
British Airways was the FTSE-100’s biggest loser with a drop of 6.6%. Shares fell after the U.S. and European Union agreed on an "open skies" deal that will allow more airlines to fly transatlantic routes.
Tokyo's Nikkei 225 Average fell 3.3%, the largest one-day decline in nine months. The selling was precipitated by a surge in the yen, which rose to a three-month high against the dollar as investors reduced risks associated with the carry trade.
In South Korea, the Kospi Index dropped 2.7% and Hong Kong blue chips were also hit, losing 4% in the biggest one-day percentage decline since October 2003. In China, the Shanghai Composite Index declined 1.6%, recovering from intraday declines of 3.5%.