Stocks closed lower for a second straight day Tuesday amid profit-taking from last week's rally. Oil's surge above $119 a barrel exacerbated concerns about the economy and profits, slamming shares of airlines and retailers.
The Dow Jones Industrial Average shed 104.79, or 0.8 percent, to close at 12720.23, after gaining 4.3 percent in last week's rally. The Nasdaq dropped 1.3 percent Tuesday, while the S&P 500 index lost 0.9 percent.
"We are in a bottoming process," said Al Goldman, chief market strategist at Wachovia Securities. "In a bottoming process, the mood is very fragile ... I think this is just a normal pause to refresh."
"Today's sell-off was pretty sharp," Goldman said. "This is the time to do some long-term investing -- when it hurts." His picks include cyclicals, biotech, tech and "better-managed department stores." And, "for people young of heart" -- financials and homebuilders.
Light crudesettled above $119 a barrel for the first time, buoyed by a jump in demand from China, the world's second-largest energy consumer, and concerns about supplies from Russia and Nigeria.
Among stocks most impacted by oil prices, an index of airline stocks plunged 12 percent, while an index of retail stocks dropped 2.4 percent.
United Airlines parent UAL skidded 37 percent after the company reported its loss more than tripled from a year earlier amid soaring fuel costs.
AirTranand JetBlue also posted losses, sending their shares tumbling 21 percent and 5.7 percent, respectively.
Delta and Northwest each shed 17 percent.
In economic news, existing-home sales fell 2 percentto an annual rate of 4.93 million, meeting expectations, according to a report from the National Association of Realtors. The inventory of homes for sale jumped to a 9.9 months' supply. The median national home price dropped 7.7 percent from a year earlier to $200,700.
After the latest batch of earnings, traders punished companies that reported disappointing earnings and took profits on those with reports that weren't so bad, including DuPont and McDonald's.
"It's the classic buy at the wake sell at the wedding," Goldman said of the decline in those two blue-chip stocks, noting both have gained in the past week or so.
DuPont reported its profit rose 26 percent, helped by strength in its agricultural business. Still, the stock fell 4 percent, making it the biggest decliner on the Dow. The company backed its full-year forecast but said the rest of the year would be challengingdue to weakness in the U.S.
McDonald'sblew past expectationsamid strong overseas sales. Same-store sales rose 7.4 percent, but such sales were up just 2.9 percent in the U.S. Shares of the fast-food chain slipped 0.6 percent.
Among other blue chips, AT&T reported its profit climbed 21 percent, in line with analyst estimates, led by strong growth in its wireless division. Land-line subscriptions, however, declined. AT&T shares rose 0.6 percent.
Shares of Texas Instruments and UnitedHealth declined after the companies issued profit warnings.
Texas Instruments shares fell 5.8 percent after the company slashed its forecast for the current quarter, citing lower demand for chips used in cell phones.
UnitedHealth Group shares dropped 9.7 percent after the health insurer missed earnings targets and slashed its full-year forecast.
"People are looking at [earnings] outlooks. They're worried about the economy. I think you need to see outlooks pick up, and that will help the market come back," Giri Cherukuri, head trader at Oakbrook Investments in Lisle, Ill., told Reuters.
Apple declined 4.7 percent to close at $160.20 after American Technology Research downgraded the stock to "neutral" from "buy," citing the fact that it's no longer cheap and the company might not hit its earnings targets. The stock has rebounded in the past month, after touching down at $119 in mid-March.
A half dozen analysts, including Punk Zeigel's Richard Bove and Oppenheimer analyst Meredith Whitney, slashed their earnings forecast for Bank of America, and several also cut their price targets on the stock, amid concerns about higher credit costs and loan-loss provisions. Bank of America said Tuesday that it plans to stop offering some riskier mortgagesafter it completes its acquisition of Countrywide Financial, the largest U.S. mortgage lender. A day earlier, Bank of America reported its earnings plunged 77 percent but said it expects earnings to take an "upward trajectory" this year. Bank of America shares slipped 1.6 percent.
Elsewhere in the financial sector, regional banks SunTrust and Fifth Third posted sharply lower earnings as the banks, heavily exposed to real-estate market, set aside substantially more money to cover bad loans. Southeast bank chain SunTrust reported its profit fell 45 percent and missed analyst estimates by a long shot as the bank set aside 10 times more for credit losses than it did a year earlier. Fifth Third, which operates banks in the Midwest, reported a 19-percent decline in earnings amid a fivefold increase in bad-debt reserves. Both stocks rose, with Fifth Third jumping 8 percent.
Commercial-finance company CIT Group, which can't borrow directly from the Federal Reserve, said it sold $1.5 billion of common and convertible preferred stock, 50 percent more than expected, a move that dilutes the holdings of existing shareholders. CIT has also agreed to sell more than $5 billion of assets and loan commitments and is considering selling an additional $2 billion of loan assets.
This comes a day after Citigroup announced an offering of $6 billion in preferred shares and about a week after JPMorgan raised $6 billion.
BJ Services skidded 15 percent after the oilfield-services company missed analysts' earnings target, hurt by lower prices in North America.
Also in earnings, retailer Kimberly Clark and industrial giant Lockheed Martin both posted quarterly earnings that beat expectations.
Shares of fertilizer company Intrepid Potash soared 58 percent in their debut on the New York Stock Exchange. The company raised $960 million with its initial public offering, priced late Monday at $32 a share. The stock trades as "IPI."
Still to Come:
WEDNESDAY: MBA mortgage survey; crude inventories; earnings from Boeing, Delta, Glaxo, UPS, Amazon, Apple and Pulte Homes
THURSDAY: Jobless claims; durable-goods orders; new-home sales; Earnings from Aetna,
Bristol-Myers, ConocoPhillips, Motorola, Pepsi, American Express and Microsoft
FRIDAY: Consumer sentiment; earnings from Ericsson, Honda
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