Stocks finished lower on Thursday on news that General Motors (GM) received subpoenas from the SEC, which is investigating the company's pension practices, retiree benefits, and certain transactions with auto parts maker Delphi. Durable goods orders fell and were weaker than expected.
The Dow Jones industrial average fell 115.03 points, or 1.11%, to 10,229.95. The broader Standard & Poor's 500 index was down 12.48 points, or 1.05%, to 1,178.9. The tech-heavy Nasdaq composite index lost 36.24 points, or 1.73%, to 2,063.81.
There are a few economic reports coming Friday. Third-quarter gross domestic product (GDP) is expected to rise 3.5%. Action Economics assumes that the hurricanes and Boeing strike subtracted 1% from growth on the quarter.
The final October reading for University of Michigan's consumer sentiment is expected to improve to 76.0 from the preliminary level of 75.4 and September's reading of 76.9. Action Economics says that the recent decline in energy prices should provide some upside with the final reading.
Lastly, Friday's release of the third-quarter employment cost index (ECI) is expected to rise 0.9%, which should correspond with a gain of 3.0% on the year. The data should imply that despite a strong economy and record corporate profits, compensation costs remain remarkably contained, says Action Economics.
One stock to watch Friday will be Microsoft (MSFT), which will report earnings after the market close Thursday.
On Thursday morning, Harriet Miers withdrew her nomination to the U.S. Supreme Court, due mostly to fierce opposition and questions about her qualifications, according to news reports.
Meanwhile, there are also concerns in the market about a looming indictment of Bush Administration officials potentially tomorrow in the Central Intelligence Agency-leak investigation, says Action Economics.
In economic news Thursday, U.S. durable orders fell 2.1% in September, after a 3.8% rebound in August (revised from 3.4%). Excluding transportation, orders fell 1.0%. Nondefense capital goods orders ex-aircraft were down 1.2% after a 4.0% gain the prior month. The headline data are a little weaker than expected, but may have only marginal market impact given the distortions from the hurricanes, says Action Economics.
New home sales rose 2.1% in September to a 1.22 million unit pace, below median estimates.
U.S. jobless claims fell 28,000 to 328,000 in the week ended Oct. 22, from a revised 356,000. That brought the 4-week moving average to 366,500 from 376,500, as hurricane distortions are dissipating.
Among companies in the news, General Motors (GM) confirmed the receipt of subpoenas from the SEC related to various matters involving GM that it has under investigation, including pension-related issues, retiree benefits, and certain transactions between the auto maker and former parts unit Delphi. GMAC was also served SEC and federal grand jury subpoenas. This has given rise to speculation that the auto giant could follow Delphi into bankruptcy, says Action Economics.
One bright spot was the announcement that Chiron (CHIR) received a $62.5 million bird flu vaccine contract from the government, which boosted its shares.
In earnings news, ExxonMobil (XOM) reported net income of $1.58 a share, up from 88 cents a share a year earlier. Excluding items, earnings jumped to $1.32 a share, from 96 cents a share.
Martha Stewart Living (MSO) shares skidded after the company posted a third-quarter loss from continuing operations of 51 cents a share, vs. 30 cents loss, as higher costs offset 5.7% revenue rise. The company issued a weak outlook -- it expects fourth-quarter revenue to be about $80 million and operating income to be about breakeven.
Baidu.com (BIDU) posted lower-than-expected 3 cents third-quarter earnings per ADR as higher costs offset a sharp sales rise. The Chinese Internet company expects fourth-quarter total revenue of $12.6-$13.1 million.
Treasury prices rose, helped by the sour tone on Wall Street following news that the SEC was investigating GM's books, says Action Economics. The 10-year note fell to 4.56%.
The latest batch of data was mostly weaker than expected. Jobless claims continued to fall as hurricane distortions get wrung out, giving a better read on the underlying economy, says Action Economics. But the decline in durable goods orders was still ravaged by hurricane and aircraft order effects. New home sales gained, but this was lower than expected, belying sharp weakness on the pricey coasts and a jump in supply, says Action Economics.
"Credit markets remain nervous that a large "credit event" is lurking in the wings, following rumors yesterday of a German mortgage bank liquidating Treasuries in its portfolio to pay for losses and today's news that GM is being investigated by the SEC for accounting irregularities relating to bankrupt Delphi," says Action Economics.
European stock markets finished lower on Thursday. London's Financial Times-Stock Exchange 100 index was down 45 points, or 0.86%, at 5,182.8.
Germany's DAX index fell 94.74 points, or 1.93%, to 4,806.05.
Traders ignored a report showing Gfk consumer confidence index rose to a four-month high in October after gasoline prices declined from a record and the country's largest political parties agreed to try and form a coalition government, says Standard & Poor's MarketScope.
In Paris, the CAC 40 index lost 76.29 points, or 1.73%, to 4,336.41 on higher oil prices and worries about higher interest rates.
Asian markets finished mixed on Thursday. In Japan, the Nikkei 225 index rose 22.06 points, or 0.16%, to 13,417.08.
Stocks in Tokyo rose for a third consecutive day, boosted by gains in shares of companies that derive earnings primarily from the domestic economy. Domestic-related stocks have performed well this year, boosted by signs that consumer spending is improving and the country's long deflationary cycle is coming to an end. Market upside was limited by weakness in tech shares, says Standard & Poor's MarketScope.
In Hong Kong, the Hang Seng index fell 77.08 points, or 0.53%, to 14,381.06, partly reflecting disappointment related to a lackluster trading debut for China Construction Bank. Some are also growing cautious ahead of the U.S. Federal Reserve policy meeting next week, says Standard & Poor's MarketScope.