Stocks Close Lower; Disney Falls, Dollar Rises
Stocks closed down Thursday soon after Walt Disney released worse-than-expected results into a market already weakened by disappointing results from Cisco and a rise in the dollar as European debt troubles continued to roil currency markets.
TheDow Jones Industrial Average fell 73.94 points, or 0.7 percent, to close at 11,283.10 after sinking more than 120 points earlier in the session. Thursday's weak performance followed a lackluster trading session on Wednesday with all the major indexes eking out gains.
Cisco, Disney and Boeing led the blue-chips lower, while Chevron and Exxon rose.
The S&P 500 fell 5.17 points, or 0.4 percent, to 1,213.54, while the tech-heavy Nasdaq dropped 23.26 points, or 0.9 percent, to 2,555.52. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose above 18.
Most key S&P sectors were lower led by technology, financials and telecom. Energy and materials rose.
Disney temporarily posted earnings resultsto its website before the close on Thursday, showing earnings and revenues that missed estimates. Disney's stock had been trading close to its 52-week high.
The cost of debt in Ireland,meanwhile, soared as the yield spread between 10-year Irish and German bondsreached its widest levels ever. Concerns with Ireland pushed the euro to record lows and the dollar higher.
Cisco shares tumbled after reporting Wednesday afternoon that its revenue outlook fell short of Street forecasts. The networking company's profit, however, was better than expected. Nonetheless, the stock was pummeled in after-hours trading, and continued to sink Thursday as several brokerages lowered their ratings and price targets for the stock. The selloff was the biggest for Cisco after an earnings release.
UBS held its "neutral" rating for the stock but called for a major "unexpected downward reset." The concerns stem from Cisco's forecast for weak sales to state and local governments, and weak cable and European spending, UBS said.
Cisco CEO John Chambers said he was even surprisedby the revenue outlook in an interview on CNBC. “We got a couple of air pockets here that surprised us, and I wish we were smarter on that," Chambers said.
While Cisco's poor outlook was pressuring most other technology stocks, the company's views on slowing orders reflect a broader worry that the economy is not as strong as many investors thought and providing a reason for stocks to sink lower overall.
"I do think it’s a general portrayal of the economy as a whole that’s hurting the market," said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
There are technical factors as work as well, as the market retrenches after reaching highs for the year. Despite a pullback for much of the week, the S&P 500 continues to trade above 1,198, a key resistance level, meaning the broader upward trend hasn't broken.
"We’re pulling back within the context of a strong uptrend," Pado said.
Insiders appear to have taken advantage of the market's recent run-up to sell their holdings, according to TrimTabs Investment Research. Insiders sold $16 billion in the the sixty days ended Nov. 3. That's the most sold since $20 billion from October to November 2007, TrimTabs said.
Materials stocks were higher throughout the session, as strong industrial production numbers out of China gave investors confidence in global demand. Allegheny Technology, Newmont Mining, and US Steel were among several stocks that traded higher.
The tech-heavy Nasdaq was hit especially hard after Cisco's dismal outlook, although some tech names turned higher in afternoon trading.
Intel sharesreversed course after trading lower earlier in the session. Morgan Stanley upgraded the tech giant to "overweight" from "equal-weight," saying Intel's "Sandy Bridge" semiconductor chips will enable "the next generation of smaller, optimized PC computing devices."
Rival Dell shares , however, slipped almost 5 percent even after
Kulicke & Soffa fell almost 3 percent after the semiconductor equipment maker reported a weak view for the first quarter of 2011, despite soaring profit and revenue in its fiscal fourth quarter.
Other tech names that turned positive included Qualcomm , which told Reuters it plans to sell its wireless broadband business in India, Agilient Technologies , and Novell.
Shares of Cisco rivals Juniper Networks , Broadcom , Riverbed Technology and Jabil Circuit also sank.
Meanwhile, Level 3 Communications soared after news the company won a multiyear contractwith Netflix as a primary content streamer.
And in Europe, Siemens rose after the German tech company, proposed a sharp rise in its full-year dividend and raised its 2011 outlook. The company's earnings beat forecasts.
Bank stocks were largely in the red after a JPMorgan note on Wednesday warned that many provisions of the financial regulation bill might take time to be put in place because Republicans may "seek to use the appropriations process to slow implementation of Dodd-Frank by underfunding the new federal agency staff needed to get those programs off the ground.”
Shares of JPMorgan, Bank of America and Wells Fargo among others were trading lower.
In other earnings news, Viacom reported better-than-expected quarterly results, citing strong results at its MTV unit.
Nvidia was slated to report earnings after-the-bell tonight.
Shares of Kohl's were slightly higher after the retailer reported earnings results that came in line with expectations and forecasts same-store-sales would rise between 2 and 4 percent in the fourth quarter. Kohl's plans to open more stores than initially planned in 2011.
Meanwhile, shares of Urban Outfitters declined after the retailer's shares were cut to "hold" from "buy," by Keybank, while Lululemon Athletica shares were flat after a similar downgrade. Chico's, however, fell after the brokerage raised the specialty retailer's shares to "buy" from "hold." UBS raised its price target for Chico's to $10 a share from $9.
Also on the retail front, Wal-Mart is giving holiday shoppers a break this year by offering free shipping on 60,000 online items through Dec. 20.
Boeing shares continued to weaken after leading the Dow lower the previous session following news of troubles with the airline maker's 787 Dreamliner. Boeing has halted future testsof the 787.
Volume on the consolidated tape of the New York Stock Exchange was 3.8 billion shares. On the floor of the NYSE, 953 million shares changed hands.
Overseas, the G20 meeting of world leaders in Seoul continued to wrestle with questions involving currency and trade imbalances. Moody's Investors Service, meanwhile, gave China a lift, upgrading China's government bonds to Aa3 from A1. Moody's cited China's resilient economyand sound balance of payments.
Oil prices climbednear $88 a barrel, rising to 25-month highs, lifted by increased demand in the world's top two oil consuming nations and after OPEC revised up its 2011 demand growth forecast. Meanwhile, gold hovered closed closed at $1,403 an ounce.
And Treasury Secretary Tim Geithner told CNBC the United States would never seek to weaken its currencyto gain a competitive advantage. That helped the dollar index slightly, but did little for stocks. Meanwhile, former Federal Reserve chief Allen Greenspan wrote in the Financial Times that the U.S. is pursuing a policy of a weaker dollar and pushing up exchange rates around the world.
Economist Joseph Stiglitz, meanwhile, said quantitative easing won't boost the economy, and risks starting trade wars.
Banks, government offices, and the bond market will be closed due to Veterans Day holiday.
On Tap This Week:
THURSDAY: Veterans Day — Bond market closed, stocks and futures markets open; Earnings from Disney and Nvidia.
FRIDAY: APEC CEO summit, Consumer sentiment, Earnings from DR Horton and JCPenney.
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