U.S. stocks closed sharply lower Thursday as energy issues sank along with oil futures and Dow industrials component General Electric's (GE) outlook was revised to negative from stable by S&P Ratings Services.
The market's retreat also came amid the start of quadruple witching, as market index futures, market index options, stock options, and stock futures expire, reports S&P MarketScope.
There was little reaction to a report that weekly U.S. initial jobless claims fell 21,000 to 554,000, leading economic indicators fell 0.4%, and the December Philadelphia Fed index improved to -32.9.
Bonds continued to rally on Tuesday's Federal Reserve rate cut. Strength in the dollar index sent gold lower.
Some traders are discounting the end of the recession, notes S&P MarketScope, but billionaire investor Wilbur Ross sees the downturn lasting into 2011.
On Thursday, the 30-stock Dow Jones industrial average finished lower by 219.35 points, or 2,49%, at 8,661.46. The broad S&P 500 index fell 21.30 points, or 2.36%, to 883.12. The tech-heavy Nasdaq composite index shed 26.94 points, or 1.71%, to 1,557.48.
On the New York Stock Exchange, 18 stocks fell in price for every 13 that rose. The ratio on the Nasdaq was 17-10 negative.
January West Texas Intermediate crude oil futures were off $3.36 to $36.70 Thursday as dealers struggled to unwind the buildup of crude oil at the Cushing, Okla. NYMEX crude oil delivery point, and resorted to price cuts to get rid of oversupply. Jan. reformulated gasoline futures were off 3.60 cents to 96.95 cents and Jan. heating oil futures off 5.45 cents to 138.80 cents. The market saw a muted response to OPEC's decision to cut its oil output by 2.2 million barrels per day, a 4.2 million barrel per day reduction relative to September production levels, in a bid to counter falling demand and sinking prices. The growing global recession is restricting demand for commodities.
Bloomberg reports Treasury Secretary Henry Paulson may ask Congress for the second half of the $700 billion bank rescue program, concerned that the deepening recession may spark further financial turmoil. Paulson could soon exhaust the first $350 billion with the bailout that President's administration has pledged for General Motors and Chrysler. The Treasury chief is discussing with aides strategies to seek congressional approval for the rest of the Troubled Asset Relief Program, people familiar with the deliberations said. Securing the extra money would give the Treasury a cushion in case another bank or insurer neared collapse. The obstacle: Democratic lawmakers have warned the Bush administration it must come up with a new effort to aid homeowners in danger of losing their properties.
In economic news Thursday, the U.S. Philadelphia Fed index improved to -32.9 in December, recovering from November's drop to -39.3, its worst reading since October 1990. The reading was better than the -40.0 reading that markets had expected. The employment index fell to -28.7 from -25.2, but new orders improved slightly to -25.2 from -31.4. Prices paid fell to -33.2 from -30.7and prices received plummeted to -37.8 from -15.5. The 6-month ahead index dropped to -14.5 from -10.4.
The Conference Board announced that its index of leading indicators fell another 0.4% in December, following a 0.9% October drop, and is down 2.8% over the last six months. The consensus was for a 0.5% drop. Big declines in building permits, stock prices, and unemployment claims offset increases in the money supply and the yield spread. The coincident index dropped 0.3%, while the lagging index rose 0.1%. Six of the 10 indicators showed weakness in November. The consistent decline in the leading index implies that the economy will continue to decline for several more months, according to S&P Economics.
U.S. jobless claims fell 21,000 to 554,000 in the week ended December 13, from a revised 575,000 the week before (was 573,000). That brought the 4-week average to 543,750 from 541,000 previously. That's the highest since December 18, 1982. Continuing claims fell 47,000 to 4,384,000 in the week ended December 6, after surging 340,000 to 4,431,000 the week before (revised from 4,429,000).
The yen weakened from near a 13-year high against the dollar and tumbled versus the euro after Japanese officials signaled they may intervene in the foreign- exchange market for the first time in four years. Bloomberg reported that Finance Minister Shoichi Nakagawa told reporters in Tokyo he is "keenly watching" currency markets and has "the means" to limit the yen's advance. "We're seeing increased jawboning by officials, increasing speculation that intervention is imminent," Lee Hardman, a London-based currency strategist for Bank of Tokyo-Mitsubishi told Bloomberg. "The Bank of Japan may also ease policy, which may slow the pace of yen gains."
Spain will inject as much as 10 billion euros into its banks next month, buying hard-to-sell assets from lenders as part of its program to stimulate lending.
Among companies in the news Thursday, General Electric shares sank after S&P Ratings Services revised its outlook on the conglomerate and and its units, including General Electric Capital
Corp., to negative from stable, affirms AAA long-term and A-1+ short-term credit ratings. S&P Ratings said its negative outlook is based partly on concerns regarding General Electric Capital Corp.'s future performance and funding, and that fundamentals-based earnings and cash flow could decline sufficiently during the next 2 years to warrant a downgrade.
The Wall Street Journal reported that word or phrase (GM) and Chrysler LLC have reopened merger talks, with sources saying that Chrysler owner Cerberus Capital Management LP has signaled its willingness to give away part of its ownership in the auto maker. However, a GM spokesman later said there was nothing new on the negotiations. Both GM and Ford Motor Co. (F) have idled a batch of plants for a month into year-end.
Shares of Ingersoll-Rand (IR) sank after the industrial firm guidedfourth-quarter and full-year forecasts lower.
FedEx Corp. (FDX) posted second-quarter earnings per share (EPS) of $1.58, vs. $1.54 one year earlier, on a 1% revenue rise. The company sees second-half EPS of 69 cents-$1.94. FedEx said it will not provide third-quarter guidance due to significant economic uncertainty and the difficulty in forecasting impact of recently acquired DHL customers. The company reaffirmed its previous fiscal 2009 EPS estimate of $3.50-$4.75, which assumes weak global macroeconomic conditions, anticipated volume gains from DHL, and stable fuel prices. FedEx is implementing additional cost reduction initiatives.
Nike Inc. (NKE) reported second quarter EPS of 80 cents, vs. 71 cents one year earlier, on a 6% revenue rise. Nike reported worldwide futures orders for athletic footwear and apparel, scheduled for delivery from December, 2008 through April, 2009, totaling $6.7 billion, 1% lower than such orders reported for the same period last year, but noted that excluding forex effects, orders grew 6%.