Stocks finished the third quarter on a down note Monday amid persistent worries about weak earnings and economic growth. The major averages recovered from the worst levels of the day, but investors found little reason to buy considering the tough preannouncement season has led to sharply reduced estimates for earnings growth.
The Dow Jones industrial average lost 109.60 points, or 1.42%, to 7,591.93. The tech-heavyy Nasdaq composite index fell 27.07 points, or 2.26%, to 1,172.09. The broader Standard & Poor's 500-stock index was off 12.08 points, or 1.46%, to 815.29.
The S&P 500 remains the only major index to hold above its July lows, bouncing off support in the 800 area. For the third quarter, the Dow lost 17.9%, the S&P 500 fell 17.7%, and the Nasdaq declined 19.9%.
Economic reports coming out Tuesday include the ISM-manufacturing index, a survey of national manufacturing activity. Economic research outfit MMS International expects the index to hold at 50.5 for September, the same level as August. A reading above 50 indicates expansion. Auto sales for September and construction spending for August are also due.
On Monday, one weight on the market was the surprisingly large drop in the September Chicago PMI, a survey of manufacturing activity in the Midwest. The index fell to 48.1 on the month from 54.9 in August. A reading below 50 indicates contraction in manufacturing. This report gives more evidence that economic strength is deteriorating, MMS says.
In other economic news, the Commerce Dept. reported that August consumer spending rose a weaker-than-expected 0.3% after jumping 1% in July. Since consumer spending accounts for two-thirds of economic growth, the market keeps a close eye on the trend. On the bright side, personal income was up 0.4%, meeting forecasts, vs. a flat reading in July.
Among stocks in the news, Wal-Mart (WMT) shares fell after the company warned that September same-store sales were weaker than expected as consumers buy less clothing. It also blamed a tough comparison to last year because of tax-rebate checks. The retailer sees 3% to 4% sales growth, instead of 4% to 6%, for the month. The news came ahead of the retail giant's analyst meeting on Tuesday.
Retailers J.C. Penney (JCP) and Federated Department Stores (FD) also said sales for the month were below plan.
Walgreen (WAG) reported fourth-quarter EPS of 24 cents, a penny lower than expected, on 9.4% higher total same-store sales. The shares declined after the news.
General Electric (GE) rebounded after getting hit in early trading on an earnings estimate cut by Merrill Lynch.
In the tech sector, chip giant Intel (INTC) reportedly tightened its third-quarter revenue forecast to a range of $6.3 billion to $6.7 billion, vs. its previous $6.3 billion to $6.9 billion guidance.
And shares of eBay (EBAY) fell after RBC Capital downgraded the stock to underperform from sector perform.
Treasuries ended higher in price and benefitted from falling world equity prices and a much worse-than-expected Chicago PMI figure that boosted the contract from the opening bell. But investors took some profits and by the close, the short end had outperformed the long, notes MMS International.
European markets were down sharply amid negative earnings news, along with continued uncertainties surrounding U.S.-Iraq relations and world economic growth. In London, the Financial Times-Stock Exchange 100 index ended with a decline of 185.40 points, or 4.75%, to 3,721.80.
In France, the CAC 40 lost 173.07 points, or 5.87%, to 2,777.45. Scor, France's biggest reinsurer, plunged after saying it plans to sell 400 million euros of stock to shareholders to fund its business.
And in Germany, the DAX Index fell 149.87 points, or 5.13%, to 2,769.03. Germany's Finance Minister Hans Eichel reportedly cut his growth forecast for Europe's largest economy to 1.5% next year from 2.5% previously.
In Asia, the markets finished lower. The Nikkei fell 147.15 points, or 1.54%, to 9383.29 amid profit-taking after sharp gains over the past two sessions on the back of speculation that the Japanese government would inject public funds into the banking system. Japan's major stock indices, however, recouped some of their losses in the last hour of trading following news that Hakuo Yanagisawa, who has been reluctant to endorse a plan to infuse public funds into banks, was sacked as financial services minister in a cabinet reshuffle.
In Hong Kong, the market lost 222.25 points, or 2.39%, to 9072.21.