U.S. stocks closed lower Thursday as a stronger dollar pressured commodities-related issues, while profit-taking forced the broader market below the 13-month highs it reached earlier in the week. Along with commodity issues, financial and homebuilding stocks were among the weakest performers.
Stocks actually began the day with slight gains bolstered by news that networking gear maker 3Com (COMS) agreed to be acquired by computer hardware and services giant (HPQ) and a report that U.S. weekly initial jobless claims fell by a more than expected 12,000 to 502,000, while continuing claims fell 139,000 to 5,631.000.
An earnings forecast from retailing giant Wal-Mart (WMT) that came in shy of expectations dented sentiment, though rival Kohl's (KSS) posted a better than expected profit.
On Thursday, the 30-stock Dow Jones industrial average finished lower by 93.79 points, or 0.91%, at 10,197.47. The broad Standard & Poor's 500-stock index was down 11.27 points, or 1.03%, at 1,087.24. The tech-heavy Nasdaq composite index fell 17.88 points, or 0.83%, to 2,149.02.
On the New York Stock Exchange, 24 stocks were lower in price for every six that advanced. Breadth on the Nasdaq was 20-6 negative.
According to S&P technical analyst Chris Burba, Thursday's stock market action reflected an unwinding of the carry trade -- liquidating holdings in stocks and other markets and repaying the dollar-based loans that funded those purchases.
"It may only be a temporary phenomenon. But this unwinding could be enough to take stocks lower in the days or weeks ahead," says Burba.
Treasury prices rose after a disappointing auction of $16 billion in 30-year bonds. The 10-year yield, which moves in the opposite direction of price, reversed down to 3.44% from highs of 3.52%. The 30-year yield jumped 10 basis points to 4.48%, only to reverse back down to 4.38%.
The dollar index was up 0.48 to 75.64 at as President Barack Obama headed for a nine-day visit to Asia, where he is expected to be asked by various government to step up efforts to stem the greenback's decline.
December gold futures were off $7.00 to $1107.60 per ounce as the dollar index rallied. Also, the president of Barrick Gold (ABX), the world's largest producer, said there is a strong case that gold is at its peak.
December NYMEX crude oil futures fell $2.17 to $77.11 per barrel following an Energy Dept. weekly inventory report that showed crude oil stocks rose 1.8 million barrels, gasoline stocks rose 2.5 million barrels and distillates rose 300,000 barrels. The report sent shares of energy firms like Exxon Mobil (XOM) and Chevron (CVX) lower.
After the Dow industrials and S&P 500 index reached 13-month highs on Wednesday, bullish momentum ran out in Asia Thursday. Tokyo stocks fell 0.68%, Hong Kong fell 1.01%, Shanghai fell 0.07%.
European stocks ended mixed. London's FTSE 100 index added 0.19%, the CAC 40 index in Paris was down 0.17%, and Germay's DAX index fell 0.08%.
Traders Friday will focus on data on the mood of the consumer and U.S. trade. Economists expect the preliminary November reading of the University of Michigan's Consumer Sentiment survey to register 70.0 from October's reading of 70.6. Increased volatility in the stock market and headline news that the unemployment rate has topped 10% will likely hold back sentiment again this month, says Action Economics.
The September U.S. trade deficit is expected to widen by $0.7 billion to $31.8 billion, according to economists' median forecast. Friday's release of October import prices is expected to jump 1.0%), while export prices are seen increasing 0.2%
In economic news Thursday, U.S. jobless claims fell 12,000 to 502,000 in the week ended November 7, following an upwardly revised 514,000 the week before (was 512,000). It's the lowest level since the 488,000 reported on Jan. 3. Continuing claims declined 139,000 to 5,631,000 in the week ended Oct. 31, from a revised 5,770,000 (was 5,749,000).
"The improvement in the jobs data continues, but at a very slow pace," says Action Economics.
The U.S. Treasury posted a $176.4 billion deficit in October to begin fiscal 2010. That is up 13.4% compared to the $155.5 billion October 2008 deficit.
Some bracing for tomorrow's reports on the Sept. Trade deficit, Oct. Import Prices, and the Nov. Michigan Consumer Sentiment Index.
In company news, Wal-Mart posted third-quarter earnings per share (EPS) from operations of 84 cents, vs. 77 cents EPS one year earlier, on 0.8% lower total U.S. same-store sales (SSS) with fuel and 0.4% lower SSS without fuel; total sales were up 1.1%. Wall Street was looking for EPS of 81 cents. The company sees fourth-quarter EPS from continuing operations of $1.08-$1.12, as a result, it raised its guidance on fiscal 2010 EPS from continuing operations to $3.57-$3.61 from $3.50-$3.60.
Kohl's posted third-quarter EPS of 63 cents, vs. 52 cents EPS, on 2.4% higher same-store sales and 20% higher total sales.
Advanced Micro Devices (AMD) and Intel (INTC) announced an agreement to end all outstanding legal disputes between the companies, including antitrust litigation and patent cross license disputes. Under terms of the agreement, AMD and Intel obtained patent rights from a new 5-year cross license agreement, the two chipmakers will give up any claims of breach from the previous license agreement, and Intel will pay AMD $1.25 billion. Intel has also agreed to abide by a set of business practice provisions.
Technology giant Hewlett-Packard (HPQ) announced a definitive agreement to acquire networking gear maker 3Com (COMS) for an enterprise value of about $2.7 billion. H-P also posted fourth-quarter non-GAAP EPS (preliminary) of $1.14, vs. $1.03 EPS, despite an 8% revenue decline.
United Technologies (GE) agreed to acquire the security business of General Electric (GE) for $1.82 billion.
In Washington, Thursday marks a decade to the day that President Bill Clinton signed the repeal of the Depression-era Glass-Steagall Act that split investment-banking from lending and deposit-taking. The repeal allowed the creation of Citigroup (C), the financial colossus now propped up by $45 billion in taxpayer rescue funds. Financial firms are scrambling to prevent Congress from re- imposing the act. "We're playing with live ammo," said Sam Geduldig, a lobbyist at Clark Lytle & Geduldig who represents financial- services firms. "The banking community is rightfully concerned." The Financial Services Forum, which represents chief executive officers of 18 of the largest financial firms and whose lobbyists organized a Nov. 9 visit to Rep. Paul Kanjorski's office, has scheduled or met about a dozen lawmakers or aides with the House Financial Services Committee in the last week. The U.S. needs big financial firms to compete globally, said Rob Nichols, the group's president.
Lawmakers are considering breakup proposals after public outcry over the $700 billion rescue of firms including Citigroup, Bank of America (BAC) and American International Group (AIG). Congress passed Glass-Steagall in 1933 after speculative activities by many banks brought the system close to collapse. One result: Morgan Stanley (MS), the investment bank split off from what is now JPMorgan Chase & Co. (JPM).
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