Faced with more disappointing second-quarter earnings results and comments from Fed Chairman Alan Greenspan about a continued cautious stance on the near-term economy, investors decided there still isn't much reason to buy. The major averages finished lower Tuesday for the third day in a row.
"Everything's red today. The earnings news hasn't been positive, there's no economic news and Greenspan hasn't said anything new," said Stephen Carl, principal and head of equity trading at the Williams Capital Group. Carl added it will take consistently positive economic data coupled with strong earnings before investors feel comfortable diving back into the market long-term. And that scenario may take anywhere from two to six months to play out, Carl said.
Earlier in the session, the Fed Chief presented the same cautious outlook before a Senate Banking panel that he offered in last week's testimony before the House Financial Services Committee. In Tuesday's address, Greenspan noted the buoyant U.S. housing sector has helped keep the nation's economy afloat. He also said the economy is not yet out of the woods, leaving room for more interest rate cuts to spur spending.
In addition to Greenspan's comments, much of the focus Tuesday was on earnings results. The saga at ailing telecom equipment giant Lucent Technologies Inc. (LU) continued as it posted a quarterly loss that was worse than analysts expected. The company also said it would slash another 15,000 to 20,000 jobs. Lucent stock lost more than $1 to finish above $6.
Online retailer Amazon.com Inc. (AMZN) on late Monday posted a smaller quarterly pro forma loss that beat Wall Street expectations. Amazon shares lost nearly $4 to close at $12 and change.
Among other stocks in the news Tuesday, Exxon Mobil Corp. (XOM) said second-quarter earnings, excluding special items and merger effects, rose to $4.38 billion, or $0.64 a diluted share, which landed within the range of analyst expectations, but failed to beat the consensus forecast of $0.66. Shares of Exxon Mobil shed more than 3%.
The Dow Jones Industrial Average ended down 183.30 points, or 1.76%, to 10,241.12. At one point during the session, the Dow was down more than 200 points, or nearly 2%. The tech-heavy Nasdaq Composite was off 29.34 points, or 1.48%, to 1,959.22. The broader S&P 500 Index was down 19.39 points, or 1.63%, to 1,171.64.
U.S Treasuries ended mixed as stocks fell. Greenspan offered no fresh incentives in his testimony to materially alter traders' positions.
Looking ahead to the rest of the week, the market will pick through a fresh batch of economic data for clues about when the economy may gain steam. Among the economic reports due between Wednesday and Friday are updates on home resales, new-home sales, jobless claims, orders for durable goods, and the second quarter GDP.
European markets finished lower. In London, the Financial Times-Stock Exchange 100 index lost 85.10 points, or 1.57%, to 5,320.20. In France, the CAC 40 was down 56.32 points, or 1.15%, to 4,855.60. And in Germany, the DAX Index shed 128.47 points, or 2.22%, to 5,663.26.
Asian markets ended mixed. Japan's Nikkei 225 rebounded from Monday's plunge to 16-year lows to close higher by 273.62 points, or 2.36%, to 11,883.25. Among the leaders were bank shares, and tech and telecom stocks. In Hong Kong, the Hang Seng lost 22.35 points, or 0.18%, to 12,214.10. By Heesun Wee in New York