Stocks Tumble as Profit Taking Kicks In
OK, everybody out of the pool.
Stocks snapped their winning streak Thursday, sliding at the open as investors cashed in their bank chips.
Economic data released before the bell were predictably grim: Initial jobless claims rose by 3,000 last week to 588,000, more than expected. Durable-goods orders skidded 2.6 percent last month, also more than expected. Excluding transportation, orders tumbled by 3.6 percent, which was far worse than the 2.8-percent slide expected. And new-home sales tumbled 14.7 percent to a 331,000 annual rate, the slowest pace on record and a far cry from the 400,000 rate expected.
The profit-taking eclipsed some good news out of the Capitol: The House passed the stimulus bill, handing President Barack Obama the first major legislative victory of his tenure. And government officials have discussed pouring a further $1 trillion to $2 trillion to help backstop the banking system, the Wall Street Journal said, citing people familiar with the matter. And the Federal Reserve signaled it would keep interest rates near zero for quite “some time” and would continue to use unconventional tools to battle the fallout.
But investors were done with cheering the stimulus, having bought on the run-up. Today, it was sell on the news.
Banks tanked: Bank of America was the biggest drag on the Dow. Citigroup, American Express and Wells Fargo all fell sharply.
Allstate dropped 20 percent after the largest publicly-traded home and auto insurer reported a huge loss.
Oppenheimer analyst Meredith Whitney said she remains "cautious" on financial stocks and said the so-called "bad bank" strategy won't directly get credit flowing again.
On the earnings front, Fordmissed analysts' targetwith a $5.88 billion loss but said it had enough cash on hand to continue operations and said it would not require government bailout help.
3Mnarrowly beat estimates with a 97 cent per share profit; Eli Lillyalso beatwith a $1.07 per share profit; and Altria met with a 37 cent per share profit.
Kodak shares tumbled more than 20 percent after the photography giant posted an unexpected loss due to a sharp drop in demand for digital cameras and commercial-printing equipment and said it would cut up to 4,500 jobs.
Starbucks said its profit was nearly cut in half, missing analysts' target, and announced plans to close 300 more storesand cut nearly 7,000 jobs.
Qualcomm was among the biggest drags on the Nasdaq after the chip maker slashed its full-year revenue forecast amid weak demand for cell-phone chips.
AT&T shares dropped after JPMorgan cut its earnings forecast and price target on the telecom stock, saying that, given the amount of line losses and curtailed business spending, they expet "further deterioration of wireline fundamentals."
Among the results due out after the bell today is a report from Amazon , which faces a tall order from Wall Street.
And the credit crisis has officially arrived at the Post Office: The government is considering cutting out Saturday deliveries to chip away at its massive deficits.
Still to Come:
THURSDAY: Earnings from Amazon, Broadcom and Colgate-Palmolive
FRIDAY: Q4 GDP; consumer sentiment; Earnings from Chevron, ExxonMobil, P&G and Honeywell
ALL WEEK: Davos Economic Forum
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