Stocks suffered a broad selloff Tuesday in heavy trading as investors cashed in on December gains and oil prices jumped. The markets were further pressured after minutes from the Federal Reserve's December policy meeting suggested support for an interest rate hike, according to Standard & Poor's MarketScope.
The Dow Jones industrial average fell 98.65 points, or 0.92%, to 10,630.78. The broader Standard & Poor's 500 index declined 14.04 points, or 1.17%, to 1,188.04. The Nasdaq composite index dropped 44.29 points, or 2.06%, to 2,107.86.
Looking ahead to Wednesday, among the companies reporting earnings is agricultural products giant Monsanto (MON).
On the economic calendar Wednesday, the Institute for Supply Management will release its December index of business activity in the services and non-manufacturing sector. The Mortgage Bankers Association will also release its tally of mortgage applications for home buying and refinancing for the week ending Dec. 31, and the Energy Information Administration will publish its weekly information on petroleum inventories in the U.S.
On Tuesday, a report on the Federal Open Market Committee's Dec. 14 meeting on interest rates showing that members were concerned about the potential for inflation and excessive risk-taking suggested future rate hikes, according to Informal Global Markets.
In other economic news Tuesday, the Commerce Dept. released a report showing that U.S. factory orders for November rose 1.2% from the previous month, slightly more than economist's expectations of 1%. The October gain was revised to 0.9% from 0.5%.
Major automakers announced December and year-end sales figures. Ford (F) reported that December U.S. sales rose 1%, year on year. General Motors (GM) December sales dipped 3.4% year on year. Sales at Daimler-Chrysler's (DCX) Chrysler unit were up 10.5%, while Toyota's (TM) U.S. total jumped 22.5%.
Two retail reports released Tuesday showed evidence of a strong holiday shopping season, according to Action Economics. The International Council of Shopping Centers and UBS Bank's weekly tracking of retail sales showed Tuesday that chain store sales rose 0.2% in the week ended Jan. 1, after a 2.7% rise in the previous week, which was the last before Christmas. Redbook also reported Tuesday that chain store sales rose 0.2% over the five weeks of December ended Jan. 1, compared to November. On a year-over-year basis, the report showed that sales grew to a 2.8% pace from 2.2%.
Oil prices, after falling 3% Monday on expectations of warm winter weather in the U.S., rebounded Tuesday. February NYMEX crude settled up 4.25% at $43.91.
In U.S. corporate news, The Wall Street Journal reported Tuesday that defense contractors Lockheed Martin (LMT) and Northrop Grumman (NOC) are poised to take big hits from $30 billion in proposed budget cuts as the Pentagon trims its costs, because of the rising cost of the war in Iraq. Lockheed Martin's stock price ended down 1.8% and Northrop Grumman ended down 2%.
The battery maker Rayovac (ROV) announced that it is buying privately held United Industries Corp. in a deal valued at about $1.2 billion in stock, cash, and assumed debt. United Industries makes Vigoro lawn care products, Cutter insect repellent, and pet supply products. Rayovac's stock price closed 17% higher Tuesday.
Krispy Kreme (KKD) shares closed 15% lower after the Associated Press reported on a new filing in a shareholder lawsuit claiming that the baker hid the fact that its sales were slowing by doubling shipments to wholesale customers at the end of fiscal quarters. Krispy Kreme also announced Tuesday that it will restate financial results for the year ended Feb. 1, 2004 to correct errors.
Following the report on the FOMC meeting, Treasuries lost ground to finish Tuesday's session with losses. At the end of the trading day, the yield on the benchmark 10-year note was 4.29%.
A report showing the German unemployment rate at a seven year high helped strengthen the U.S. dollar against the euro. At market's close, the dollar was trading at $1.3272 per euro.
European stocks closed mixed Tuesday.
In London, the Financial Times-Stock Exchange 100 index closed up 32.7 points, or 0.68%, to 4,847.0 as oil prices fell.
Germany's DAX index closed down 1.03 points, or 0.02%, to 4,290.50, after the figures were released showing Germany's unemployment rate at 10.8%.
In Paris, the CAC 40 index close up 7.62 points, or 0.20%, to 3,863.30.
Asian markets closed mixed Tuesday. Japan's Nikkei 225 index gained 28.99 points, or 0.25 %, to close at 11,517.75 on the back of blue-chip gains. Sony rose almost 1% while Matsushita Electric gained 0.18%.
Hong Kong's Hang Seng index fell 191.52 points, or 1.35%, to close at 14,045.90, as banking shares and property stocks traded lower.