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Stocks Close Sharply Lower After Fitch Report
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CNBC.com Writer
Stocks dropped heavily in the final hour of trading to finish sharply lower in thin trading Thursday following a report from Fitch on U.S. bank exposure to Europe.
The Dow Jones Industrial Average fell 190.57 points, or 1.58 percent, to finish at 11,905.59, after hovering around the psychologically-important 12,000 level for most of the session.
Alcoa [AA
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] and JPMorgan [JPM
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] led the blue-chip laggards.
The S&P 500 lost 20.89 points, or 1.66 percent, to end at 1,236.92. The Nasdaq tumbled 46.59 points, or 1.73 percent, to close at 2,639.61.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished above 33.
All 10 S&P sectors finished sharply in negative territory, led by banks.
Bank stocks led the decline after Fitch came out with a report on U.S. bank exposure to Europe. While it describes current exposure as "manageable," they also noted that "unless the euro zone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen."
Shares of major banks such as Morgan Stanley [MS
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] and Goldman Sachs [GS
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] tumbled sharply following the report.
“Our markets and economy here are much stronger than what the level of S&P 500 indicates, but it’s being held down by issues in Europe,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab. “If we can get some certainty out of Europe…we can see a fourth quarter rally.”
In Italy, Prime Minister designate Mario Monti announced he has formed a new government, completing the process in less than three days, and said he would also act as the country's finance minister. Monti added he would lay out a program for economic reform on Thursday.
UniCredit
Italian banks have ramped up their reliance on the ECB for cheaper funding since the summer as the euro zone's third biggest economy was sucked ever deeper into the region's debt crisis and its lenders faced sharply higher refinancing costs.
Meanwhile, the Spanish economy did not grow in the third quarter, fueling threats of a recession. The Spanish Treasury will try to raise between 2 and 3 billion euros in government bonds on Thursday, and the latest GDP figures will likely push yields higher. Spain is scheduled to hold general elections this weekend.
Among earnings, Target [TGT
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] topped profit estimates, but shares finished lower along with the broader market.
Meanwhile, Abercrombie & Fitch [ANF
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] tumbled after the teen clothes retailer missed earnings estimates by a huge margin.
Dell [DELL
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] slipped after the multinational IT firm posted revenue that just missed estimates and warned that its full-year revenue could be affected by an industrywide shortage of hard drives. Analysts were mixed on the stock—BofA Merrill raised its price target to $19.50 from $18.50, while FBN Securities cut its rating on the firm to "sector perform" from "outperform."
Applied Materials [AMAT
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], NetApp [NTAP
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] and Limited Brands [LTD
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] are scheduled to report results after-the-bell tonight.
Citigroup [C
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] is planning to slash approximately 3,000 positions as the banking giant grapples with turmoil in equity and debt markets, according to the Wall Street Journal.
Research In Motion [RIMM
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] gained after Goldman Sachs upgraded the BlackBerry maker's rating to "neutral" from "sell."
Oil rallied above $100 a barrel for the first time since July following news of plans to reverse the Seaway pipeline in 2012 to relieve an oil glut in Cushing, Okla.
On the economic front, U.S. homebuilder sentiment hit its highest level since May 2010, according to the National Association of Home Builders.
Homebuilders including D.R. Horton [DHI
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], Beazer [BZH
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] and Toll [TOL
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] were trading higher.
Consumer prices fell in October for the first decline in four months as Americans paid less for new cars and gasoline, although prices outside of food and energy posted a slight increase, according to the Labor Department.
U.S. industrial production gainedin October, according to the Federal Reserve, suggesting the economy was gaining steam.
Weekly mortgage applications fell last week, erasing the previous week's gains as demand for refinancing slipped, according to the Mortgage Bankers Association.
—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC—
On Tap This Week:
THURSDAY: Housing starts, jobless claims, Philadelphia Fed survey, Fed's Pianalto speaks, Motorola Mobility votes on Google acquisition, GM IPO 1-year anniversary; Earnings from Dollar Tree, GameStop, Ross Stores, Sears, Gap, Marvell Tech
FRIDAY: Leading indicators; Earnings from Heinz
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