Stocks Fall on North Korea News
Stocks finished sharply lower Wednesday, as missile tests by North Korea weighed on sentiment amid record-high oil prices. Profit-taking after recent gains probably exacerbated stock weakness, while a solid report on the labor market fanned concerns about inflation and further interest-rate hikes, says Standard & Poor's Equity Research.
The Dow Jones industrial average fell 76.2 points, or 0.68%, to 11,151.82, led downward by Intel (INTC) after UBS lowered its earnings forecast for the chipmaker. The broader Standard & Poor's 500 index shed 9.28 points, or 0.72%, to 1,270.91. The tech-heavy Nasdaq composite tumbled 37.1 points, or 1.69%, to 2,153.34.
NYSE breadth was decidedly negative, with 24 issues declining for every 9 advancing, while NASDAQ breadth was 21-10 negative.
However, strong corporate profits could help buoy stocks in the weeks and months ahead, some analysts say. "It is my belief that the rally we've seen over the last few days is the beginning of something that has more legs," notes Ed Keon, senior vice president and director of quantititative research with Prudential. "I expect earnings to be terrific, up 13%-15%. I think stocks are going to do well between now and the end of the year and think that the people who think we are going to sit in the doldrums over the summer are going to be mistaken."
The economy may have reached a key turning point, others say. "The outlook for the U.S. economy and interest rates is now at a crucial juncture," says Mark Miller, an economist at HBOS Treasury Services. "Growth appears to be slowing under the weight of higher energy prices and prior policy tightening."
Traders returned from the July 4 holiday to find geopolitical concerns back in the spotlight Wednesday. North Korea reportedly launched seven missiles early Wednesday, among them a long-range Taepodong-2 considered capable of reaching U.S. soil.