Stocks Slide as Earnings Woes Clip Gains
Stocks ended sharply lower Wednesday as a disappointing earnings report from Kraft stirred worry that consumers are cutting back on even the basics.
The Dow Jones Industrial Average shed 121.70, or 1.5 percent, to close at 7,956.66. The S&P 500lost 0.8 percent, while theNasdaq ended flat.
This came after stocks snapped a three-day losing streakWednesday following better-than-expected earnings from Merck and signs of progress from a key housing report.
Market pros said stocks are likely to retest November lows in the first half but added: That makes it a great time to buy.
"You've just got to stick to your diversification," Charles Massimo, president of CJM Fiscal Management, told CNBC.
Bank of America was the biggest drag on the Dow, falling 11 percent, as more worries about the TARP and its dilutive impact on stocks like BAC weighed on the financial sector.
Kraft Foods was the second-biggest drag on the Dow, dropping 9.2 percent, after the company, which makes everything from Maxwell House coffee to Oscar Mayer hot dogs, reported a 72-percent drop in profit, to 11 cents a share, which it attributed to costs related to a restructuring program.
Costco skidded 6.8 percent after the wholesale club warned that it would miss Wall Street's earnings target.
And that's just the beginning: Retailers will report January same-store sales tomorrow, and analysts don't expect it to be pretty.
Time Warner lost 3.7 percent after the media giant reported a fourth-quarter loss of $4.47 a share due to a $24.2 billion writedown related to its cable, publishing and AOL assets.
And, Panasonic slipped 1 percent after the world's largest maker of plasma televisions announced plans to cut 15,000 jobs and shutter 27 plants worldwide as it adjusts to the global economic slowdown.
Telecom-equipment maker Alcatel-Lucent revealed a $5.03 billion impairment charge in fourth-quarter 2008 due to the "drastic deterioration" of the economic outlook.
Executive paychecks were in the spotlight as President Obama imposed a tough new rule to cap executive compensation at $500,000 a yearfor companies receiving taxpayer funds and limiting lavish severance packages.
From the executives-gone-wild file, Wells Fargo cancelled an employee event in Las Vegas after getting railed in the press for such extravagance amid the banking crisis. The financial services company received $25 billion in government funds only months ago.
In economic news, the ISM's gauge of the service sector jumped to 42.9in January from 40.1 in December. Economists had expected the measure to slip.
Meanwhile, 522,000 jobs were shaved fromprivate-sector payrolls last month, according to ADP. This report is closely watched ahead of the government's employment report, due out Friday, though the two don't always jive.
A jump in refinancing helped boost mortgage applications last week, while outplacement firm Challenger Gray & Christmas reported a spike in planned layoffs to their highest level in seven years.
Still to Come:
WEDNESDAY: Earnings from Cisco, Prudential, Sunoco and Visa after the bell
THURSDAY: Chain-store sales; weekly jobless claims; factory orders; Earnings from Kellogg, MasterCard, Unilever, Hartford Financial, News Corp
FRIDAY: December jobs report; consumer credit
Send comments to email@example.com.