US stocks close lower
Stocks slumped broadly Monday as investors bought up Treasurys and the dollar, awaiting guidance both from official unemployment numbers and the start of corporate-earnings season later this week.
The Dow Jones Industrial Average fell 78.41 points, or 0.72%, to close at 10751.27, dragged down by a 6.5% tumble at American Express. The card company’s steep fall came after the Justice Department filed a civil antitrust complaint against it, saying the rules it imposes on merchants are anticompetitive. Rivals MasterCard and Visa settled their charges, limiting losses at those companies to 1% and 0.1%, respectively.
Microsoft was also a major weight on the market, shedding 1.9% after Goldman Sachs cut its stock-investment rating on the company to neutral from buy, saying the tech giant must increase its dividend, develop a “coherent consumer strategy” and boost its cloud-computing business.
“On a day like today, where Microsoft gets downgraded by a major firm, investors are jittery, and they can move the markets up or down either way without a lot of volume,” said David Roda, chief executive of Miami-based Roda Asset Management, pointing to low levels of market activity.
About 3.7 billion shares changed hands in New York Stock Exchange composite volume, below the year’s average of just under 5 billion.
Microsoft’s drop, along with a 2.3% decline at Intel, pushed the technology-heavy Nasdaq Composite down 1.11% to finish at 2344.52. The Standard & Poor’s 500 share index shed 0.80% to 1137.03.
Stocks had fallen even more steeply in earlier trading, and were able to recoup some of the day’s losses in the last minutes of trading.
Traders said while there was no single catalyst for the market’s declines, anxiety over European banks and the prospect of further stimulus from the Federal Reserve continued to simmer. Investors were also positioning for Friday’s monthly jobs report.
“We’re now in this limbo land where the Fed says it stands willing and able to step in, but the economic numbers that we’re seeing, like today’s, are not bad enough for the consensus to say this will probably stimulate Fed easing,” said Roda, referring to middling data from the U.S. manufacturing and housing sectors.
While the market’s focus is turning to Friday’s jobless numbers, Roda added, “the consensus has come down so much that I don’t think the number will be too far outside of expectations.”
Investors were also looking for strong corporate earnings for confirmation of last month’s robust rally, said Adrian Cronje, partner and chief investment officer at Atlanta investment firm Balentine. He is keeping a close eye on whether companies start spending cash from their record balances.
However, Alcoa, which kicks off the third-quarter earnings season on Thursday, fell 2.5% as the materials sector led the day’s declines on the S&P 500.
Deal news grabbed investors’ attention again on Monday. French drug maker Sanofi-Aventis announced a hostile $18.5 billion bid for U.S. biotech group Genzyme. Genzyme edged up 0.2%, while U.S. shares of Sanofi-Aventis fell 0.8%. Sanofi had approached Genzyme during the summer, but its offer was rejected. Sanofi Monday said its conversations with shareholders reveal they are “frustrated” with the U.S. group.
Meanwhile, shares of Sara Lee surged 7.2% after the company rebuffed an unsolicited proposal from Henry Kravis and KKR that could have led to a $12 billion leveraged deal.
As investors sold off stocks, demand for Treasurys increased, sending the yield on the 10-year note down to 2.48%. Crude-oil prices settled down 11 cents at $81.47 a barrel. Gold also edged down, though prices remain above $1,310 an ounce.
The dollar strengthened against both the euro and the yen, pausing after a monthlong slide that’s dragged the greenback to its lowest point since the beginning of the year. The U.S. Dollar Index, which tracks the dollar against a basket of six currencies, added 0.5%, while the euro fell to $1.3681, down from $1.3784 late Friday in New York.
Source: WSJ