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Dow Sheds Over 100 as Confidence Falters

CNBC.com
Tuesday, 30 Jun 2009 | 12:50 PM ET

Stocks fell sharply Tuesday, with the Dow down more than 100 points, after a report showed consumer confidence slumped in June after a sharp rise in May.

Today is the last day of the quarter, which means thin volume and volatility as investors do some last-minute window-dressing.

All three major indexes were down nearly 1 percent in morning trading. Still, investors have pushed the major averages to some impressive numbers recently as the month and the quarter come to an end.

The S&P 500 is up 16.2 percent for the second quarter, its best quarterly percentage gain since the final quarter of 1998. The Nasdaq (up 20.6 percent) has had its best quarter since the second quarter of 2003, while the Dow (up 12.1 percent) will chalk up its best quarter since the final quarter of 2003.

A positive day today would give the Dow, the S&P 500, and the Nasdaq gains for the month of June, marking the fourth-straight month of gains for each. The Dow, however, is still down for the year while the S&P 500 and the Nasdaq have yearly gains.

Equity strategists largely believe that the market won't retest March lows — but they're going to need to see some hard evidence that a recovery is underway. According to a recent Reuters survey of more than 150 equity strategists from New York to Sydney, the S&P 500 is expected to rally another 8 percent by year end. European stocks are expected to gain 3 percent, while the Nikkei is expected to end the year flat around 10,000 and the Australian market, up 6 percent. (Remember, Australia has been weathering the economic storm better than much of the globe.)

Most other Asian markets are expected to recover next year, with Hong Kong's Hang Seng Index projected to be up 26 percent by mid-2010 and the Nikkei up 15 percent by that time.

"Equity markets have entered a phase of reality checks, during which the expectation-driven rise from the March lows has to be beefed up by hard economic data," Gerhard Schwarz, head of global equity strategy at UniCredit, told Reuters.

In the morning's economic news, the slide in home prices eased up a bit in April. An index of single-family home prices in 20 metropolitan areas slipped 0.6 percentin April after a 2.2-percent decline in March. Year-over-year, prices were down 18.1 percent in April.

The Conference Board's consumer-confidence gauge slipped to 49.3in June from 54.8 in May but State Street's measure of institutional investor confidence rose for a sixth straight month in June, rising to 115.5 from 108.5 last month.

General Motors is back in court today as it attempts to garner final approval for its bankruptcy plan.

Also in autos, Ford shares gained a day after the company said that June auto sales would show that the company is increasing market share. The company said it would increase production in the third quarter to meet the expected higher demand.

In the banking sector, Ladenburg Thalmann analyst Dick Bove expects JPMorgan to post a loss of 10 cents a share as the bank pays back the government. He also slashed his full-year earnings estimate to $1.23 a share from $1.61 a share.

This came after Bove slashed his forecast for Goldman Sachs on Friday.

Bove is upbeat on Bank of America and expects Citigroup's shares to jump to $12 from their current level around $3.

In deal news, Emulex shares slid 2 percent after the chipmaker's board of directors asked shareholders to wait before making moves on an offer from Broadcom to buy the company for $11 a share.

Broadcom on Monday sweetened its offer to buy Emulex from an initial $764 million to $912 million, a 66 percent premium from Emulex's closing price on April 20, the day before Broadcom announced its bid.

Elsewhere, Encore Energy Partners said Monday it was pricing its offering of 8.2 million common shares at $14.30 per share, in line with the day's closing price.

And Apollo Group continued to get a boost from posting quarterly earnings Monday that were better than expected. The private education provider beat expectations as it saw earnings soar 44 percent in its third quarter, sending shares higher.

Abbott Labs skidded after the pharmaceutical company was ordered to pay Johnson & Johnson $1.67 billion dollars in a patent case.

It's a parade of Fed speakers today: At noon, St. Louis Federal Reserve Bank President James Bullard will talk about possible Fed exit strategies from the extraordinary measures implemented to deal with the financial crisis. After the bell, speeches by Chicago Fed President Thomas Hoenig and San Francisco Fed President Janet Yellen.

A day after the Bernard Madoff sentencing, a ruling may come this afternoon on whether Allen Stanford's bail will be revoked following an alleged Ponzi scheme. Earlier, Britain's Serious Fraud Office has frozen $100 million in assets linked to Stanford.

>> Tips for Surviving Prison: Bernie Madoff Edition

- Peter Schacknow, senior Producer at CNBC.com, contributed to this report.

This Week:

TUESDAY: Conf. Board consumer confidence; Fed's Bullard, Hoenig and Yellen speak
WEDNESDAY: Weekly mortgage applications; ISM manufacturing index; construction spending; pending-home sales; weekly crude inventories; Fed's Evans speaks
THURSDAY: Weekly jobless claims; May jobs report; factory orders
FRIDAY: All U.S. financial markets closed for the Independence Day holiday

Send comments to cindy.perman@nbcuni.com.

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