Stocks finished broadly lower Tuesday after a higher-than-expected producer price index (PPI) number stoked market fears of inflation, and traders looked ahead to further rate hikes from the Federal Reserve. Dow components General Motors GM and Exxon XOM were top laggards, while IBM (IBM ) and 3M (MMM ) both had strong earnings reports earlier in the session.
The Dow Jones industrial average fell 62.84 points, or 0.61%, to 10,285.26. The broader Standard & Poor's 500 index was down 11.96 points, or 1.00%, to 1,178.14. The tech-heavy Nasdaq composite index fell 14.30 points, or 0.69%, to 2,056.00.
November West Texas Intermediate crude oil fell by $1.40 on Tuesday, down to $62.96 a barrel, after a now-upgraded Hurricane Wilma appeared to head east of much of the gulf coast toward Florida.
Tuesday's release of the September overall producer price index (PPI) rose beyond median forecasts, to 1.9%, while the core index rose by 0.3%. Hurricane Katrina will result in a huge gain in gasoline prices and other refined product, says Action Economics. The strength in the CPI and import prices supports the upside risk on the month, says Action Economics. The headline year-over-year rise of 6.9% is the highest since the index rise November of 1990, which followed the invasion of Kuwait, according to Action Economics.
IBM posted third-quarter earnings on Tuesday. The tech giant saw net income of $1.26 per share, vs. $1.03 per share during the same period a year ago, before one-time items. Excluding the divested personal computer business, revenues rose by 4%. Standard & Poor's reiterated its hold rating on the stock, but raised its 2005 earnings estimate for the company.
Johnson & Johnson (JNJ ) also reported results for the third quarter. Earnings were up 87 cents, vs. 78 cents per share in the third quarter a year ago. The health care products manufacturer saw a 6.6% rise in sales. Also, on its earnings conference call, the company says it's considering "alternatives" under its deal to acquire Guidant (GDT ), sending shares of that company lower.
3M posted earnings of $1.10 per share, vs 97 cents per share last year, on an 8.3% rise in revenue. The company raised its outlook for the fourth quarter for and the 2005 fiscal year. 3M also announced it would set an additional stock buyback valued at $300 million.
Merrill Lynch (MER ) saw third-quarter earnings of $1.40, vs. 93 cents a share during the quarter last year. The financial services firm saw a 38% rise in revenue.
The rest of this week's earnings calendar is very heavy, and includes major companies such as Intel (INTC ), Yahoo (YHOO ), Coca-Cola (KO ), Pfizer (PFE ), Ford (F ), and McDonald's (MCD ), just to name a few.
Among other economic reports this week, the Federal Reserve will release its Beige Book for the Nov. 1 policy meeting on Wednesday. The market will also get comments from various Fed members, including Chairman Alan Greenspan.
Other data releases include housing starts on Wednesday and leading indicators on Thursday.
Treasury yields edged lower during the course of the session Tuesday after the stronger-than-expected PPI data failed to attract any follow-through selling. The 10-year note traded at 4.48%.
European stock markets finished lower Tuesday. London's Financial Times-Stock Exchange 100 index was down 22.60 points, or 0.43%, at 5,263.90, as housing data pointed to the first rise in home prices in the last four months. The FTSE breadth was roughly 60-40 down.
Germany's DAX index lost 31.65 points, or 0.64%, to 4,947.18. In Paris, the CAC 40 index fell 28.07 points, or 0.63%, to 4,461.14, after European Central Bank Chief Economist Otmar Issing said he believed that inflation would break the 2% level.
Asian markets finished mixed on Tuesday. In Japan, the Nikkei 225 index fell 48.05 points, or 0.36%, to 13,352.24, extending the decline in the index for five straight days. Investors were cautious ahead of upcoming earnings from American players including Intel (INTC ), which posts earnings later this afternoo.
In Hong Kong, the Hang Seng index rose 56.05 points, or 0.39%, to 14,597.40.