Tuesday, August 21, 2012

Stocks Steepen Losses as Investor Show Caution on Europe

Stocks finished close to session lows Monday as continued uncertainty surrounding Europe's plans to address its debt crisis yanked the Dow Jones Industrial Average back into negative territory for the year.

The Dow Jones Industrial Average gave up gains from the previous session as it lost 248 points, or 1.9% to close at 11.397. On Friday, the Dow gained 166 points, which edged the blue-chip index into positive territory for 2011.

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The rally lost momentum on Monday, however, as a spokesperson for German leader Angela Merkel warned that progress on a recapitalization plan for Europe would be slow. The Dow fell as many as 266 points at its lowest point during Monday's session and all 30 components lost ground. Alcoa(AA), Hewlett-Packard(HPQ) and 3M(MMM) were the biggest laggards.Consumer-related components AT&T(T), Procter & Gamble(PG) and Home Depot(HD) had some of the mildest losses of the session.The S&P 500 dropped 24 points, or 1.9%, to close at 1201 - not far from its session low of 1199. The Nasdaq plunged 53 points, or 2% lower, to settle at 2615. Basic materials and financial sectors had the deepest losses during a session that saw 77% of the 3.7 billion shares that traded on the New York Stock Exchange end in the red. Only 21% gained ground. Some 1.7 billion stocks changed hands on the Nasdaq. Despite earlier enthusiasm for what seemed liked progress from the Group of 20 meeting of finance ministers over the weekend, investors hedged themselves in case a purported grand plan to stabilize eurozone banks falls short of expectations. Officials have said they will reveal details at an Oct. 23 summit in Brussels. Already, finance ministers have pledged to support capital needs of eurozone banks and the European Union has vowed to that it would maximize the effectiveness of the bailout fund. If Europe fails to deliver a credible plan as promised, global stocks and the euro in particular would likely face immediate pressure. The stakes are particularly high because stocks have staged a blistering rally since the start of October. The CBOE Volatility Index has been steadily declining after topping out in early October. On Monday, the index rose nearly 17%, putting back above 30, at 33.02. European stocks deepened losses after U.S. markets opened lower. London's FTSE lost 0.5% and Germany's DAX fell 1.8%. Japan's Nikkei Average finished up 1.5%, and Hong Kong's Hang Seng jumped by 2%.In addition to Europe, investors also weighed U.S. earnings news, economic data and the announcement of the largest energy merger this year. However, Monday's earnings results were mixed and took a backseat to recent developments in Europe. Citigroup(C) beat analyst estimates before the open, reporting revenue of $20.83 billion after $20.73 billion a year ago. Analysts had expected revenue of $19.24 billion. Shares slipped 1.7% to $27.93. Meanwhile, Well Fargo(WFC) missed estimates even though the bank was thought to be stronger than Citigroup. Shares sunk 4.4% to $28.20.One of the worst performers of the day was oilfield services company Halliburton(HAL), which plunged 7.9% to $34.48 despite beating earnings estimates. The company, which has seen run up in its share value since early October, said it faces competition from lower prices abroad and increased activity in places like Iraq, according to MarketWatch.Kinder Morgan(KMI) agreed to buy El Paso(EP) in a cash and stock. The merger would create the largest network of natural gas pipelines in the U.S. El Paso shares surged 24.8% to $24.45, while Kinder Morgan shares advanced 4.8% to $28.19.In another merger, Anadarko Petroleum (APC) agreed to pay BP(BP) $4 billion to settle all claims from the Gulf of Mexico oil spill in April 2010. Anadarko shares jumped 5.5% to $74.44 and BP shares gained 0.7% to $40.17. On Monday, the euro slipped against to the greenback after rising to nearly a one-month high. The dollar index, a measure of the dollar's value against a basket of currencies, rose 0.75%. The benchmark 10-year Treasury was up 23/32, diluting the yield to 2.167%.Gold for December delivery lost $6.40 to settle at $1676.60 an ounce. In other commodities, the November crude oil contract shed 44 cents to settle at $86.38 a barrel. A read on manufacturing activity in the New York region showed little change in October. The Empire State manufacturing index continued to contract at -8.48, less than consensus estimate for -4.0, according to ThomsonONE Analytics.In a separate report, industrial production suffered from slowing exports. Capacity utilization in September remained around the August levels and industrial output for September edged up by 0.2% helped by manufacturing. August's output was revised downward to zero growth..

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