Intel Downgrade Hits Stocks; Transports Rise
Stocks tumbled Tuesday, led by techs after an analyst downgrade on Intel. Transports rose following news that Warren Buffett is buying Burlington Northern railroad.
Intel was one of the biggest drags on the Dow after after Morgan Stanley downgraded the semiconductor giant to "equal-weight" from "overweight," and cut the entire industry to "cautious" from "attractive."
The Philadelphia Stock Exchange semiconductor index was down more than 2 percent.
Johnson & Johnson announced plans to slash about 7,000 to 8,000 jobs, which amounts to 6 to 7 percent of its workforce.
The big buzz in the market this morning was that Warren Buffett's Berkshire Hathaway is buying Burlington Northern Santa Fe for $100 a share in a deal valued at $26 billion. Simultaneously, Buffett said Berkshire is offering a 50-for-1 stock split for its Class B shares.
Burlington Northern shares shot up more than 25 percent.
The news gave a boost to transports — and not just railroad stocks. FedEx and UPS rose, as did major airlines. The Dow Jones transportation index was up more than 4 percent.
But Ford and other auto makers declined ahead of auto sales, which will start to trickle out shortly. Analysts say sales likely rose last month but caution that they are still at 1980s levels.
Industrial and material stocks continued to benefit from the encouraging manufacturing readings from all over the globe yesterday: Dow componets Caterpillar, DuPont and United Technologies all advanced, despite the overall downward pull on the market today.
It's been a big week for M&A activity: On Monday, Stanley Works agreed to buy rival tool maker Black and Decker in an all-stock deal valued at $3.5 billion, based on Monday's closing prices, plus the assumption of debt.
On the earnings front, Swiss bank UBS reported its fourth straight quarterly loss and missed analysts' target.
That, plus news that Britain's Royal Bank of Scotland and Lloyds Banking Group are selling hundreds of branches, rattled the U.S. banking sector. Dow components Bank of America and JPMorgan were down more than 1 percent. Citigroup and some regional banks were even harder hit.
MasterCard beat earnings expectations as the credit-card provider raised fees to banks and slashed expenses.
After the bell today, we'll get results from Dow component Kraft Foods .
Monday's session was topsy-turvy: Stocks charged out of the gate, then retreated, before staging a late rally.
The economic calendar is light today:Factory orders rose 0.9 percentin September, after a 0.8-percent drop in August, the Commerce Department reported. Economists were expecting a gain of 1 percent.
The Fed begins a two-day-meeting today. Investors will be watching for any change in the "for some time to come" language the Fed has used for current interest-rate levels. The statement is due out at 2:15 pm ET on Wednesday.
TUESDAY: Two-day Fed meeting begins; Auto makers report October sales; Madoff accountant hearing; election day; factory orders; Earnings from UBS, MasterCard, Viacom and Kraft
WEDNESDAY: Weekly mortgage applications; ISM services index; weekly crude inventories; Chrysler business plan; Fed statement; Earnings from Comcast, Time Warner, Martha Stewart, Cisco, News Corp., Prudential and Qualcomm
THURSDAY: Retailers report October sales; BOE, ECB statements; weekly jobless claims; Earnings from Toyota, CVS, Sirius, Unilever, CBS, Nvidia and Starbucks
FRIDAY: October jobs report; Geithner speaks; Droid phone launches; wholesale trade; consumer credit; Fed's Duke speaks
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