Dow Closes Below 10,000
NEW YORK (
) -- U.S. stocks took a sharp downward turn late Wednesday and finished solidly in the red, while the
Dow
closed below 10,000 for the first time since early February. The down day came despite some improving economic signals.
The
Dow Jones Industrial Average
shed 69 points, or 0.7%, to finish at 9,974. The move lower came after as much as a 90-point gain earlier in the day, emblematic of the mercurial swings that have dominated recent sessions just before the closing bell. The
S&P 500
also lost 6 points, or 0.6%, to 1068, and the
Nasdaq
fell behind by 15 points, or 0.7%, at 2196.
Overseas, Hong Kong's Hang Seng rose 1.1%, and Japan's Nikkei inched 0.6% higher on Wednesday. The FTSE in London gained 2%, and the DAX in Frankfurt added 1.6%.
"We don't have trends anymore -- what we have is enormous volatility," said George Feiger, chief executive of Contango Capital Advisors. "If you look at the valuation of U.S. stocks, they are more or less at fair value. So there are no trends, they're just oscillating a lot. In other words, I don't think the stock market is going anywhere. The economy is recovering gradually and there's nothing that can be done to speed it up."
Feiger advises investors to plan for volatility.
TheStreet Recommends
"There's a lot to invest in, but not a lot of stability. If you know you're going to need liquidity in the next few years, then put your money in something short-duration and of high credit quality," he said.
Some news reports attributed the late-session pitch to more euro jitters. Chinese officials are taking a fresh look at the country's euro bond holdings, according to a story from the
Financial Times
, in light of the sovereign debt uncertainty roiling Europe and markets around the globe.
While Quincy Krosby, chief market strategist at Prudential Financial, said the report may have been one of several contributions to the market dip, she also said the late move was more typical of "selling into strength heading into the long weekend," with so many questions left unanswered about geopolitical and global events.
"It's still a market that's going to take any news and look at it through a prism of negativity," she added, speaking about the market's fragility.
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The Economy
Earlier, the Organization for Economic Cooperation and Development noted marked improvement to the
global economic outlook since its last forecast but warned that financial instability isn't yet a thing of the past and that austerity measures are crucial to preserving the recovery. The OECD raised its economic forecasts for Japan, the U.S. and the eurozone countries, but said Japan and the U.S. are expected to outpace Europe.
The Department of Commerce said
durable goods orders rose 2.9% in April, exceeding the increase of 1.4% that economists had been expecting. Excluding transportation, orders fell 0.1%, which misses expectations for growth of 0.7%.
New-home sales jumped 14.8% to 504,000 in April as buyers scrambled to take advantage of tax credits. April's figure exceeded economists' expectations for 425,000 and rose from 439,000 in March.
The Mortgage Bankers Association's market composite index showed that
mortgage loan application volume rose by a seasonally adjusted 11.3% last week. Refinancing applications, meanwhile, soared 17% week over week.
PNC Chief Economist Stuart Hoffman said U.S. economic data released in May has been promising with new- and existing-home sales benefiting from buyers looking to take advantage of an expiring tax credit, and manufacturing data continuing to show signs of a strengthening recovery as a jump in commercial aircraft orders lifted April durable goods orders. News about the consumer has also been encouraging.
"The Conference Board's Consumer Confidence Index increased for the third straight month in May, to 63.3. Adverse news from financial markets may end the improvement in June," Hoffman said. "However, lower gasoline prices and improved hiring may counterbalance the bad news from the stock market."
The morning after the American Petroleum Institute said crude oil inventories rose by 616,000 barrels in the week ended May 21, the Energy Information Administration reported an increase of 2.4 million barrels, which was larger than the build of 100,000 barrels that analysts polled by Platts had been expecting. Meanwhile, gasoline and distillates supplies fell, by 200,000 barrels and 300,000 barrels, respectively. Analysts had been projecting gains of 150,000 barrels and 200,000 barrels, respectively, according to the Platts survey.
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Company News
The capital goods sector was showing the strongest gains of the session, and
Walt Disney
(DIS) - Get The Walt Disney Company Report
,
Merck
(MRK) - Get Merck & Company Inc. Report
,
Caterpillar
(CAT) - Get Caterpillar Inc. Report
and
Boeing
(BA) - Get The Boeing Company Report
were leaders on the Dow, though
Microsoft
(MSFT) - Get Microsoft Corporation Report
was the principle drag on the blue-chip average.
Disney was in the headlines today after federal officials arrested an employee for allegedly attempting to sell inside information. The employee, who worked as a secretary to a Disney executive and her boyfriend were caught in an FBI sting, where federal agents posed as hedge fund traders tried to buy advance earnings news from the pair ahead of Disney's quarterly release in May, according to
The Associated Press
.
On the
New York Stock Exchange
,
Xerium Technologies
(XRM)
,
Dycom Industries
(DY) - Get Dycom Industries Inc. Report
and
Doral Financial
(DRL)
showed the strongest performance. On the other end,
American Eagle Outfitters
(AEO) - Get American Eagle Outfitters Inc. Report
trailed the most.
Shares of
Diana Shipping
(DSX) - Get Diana Shipping inc. Report
gained 0.8% as the shipping transportation services company topped analysts' estimates with a first quarter profit of 36 cents a share.
Toll Brothers
(TOL) - Get Toll Brothers Inc. Report
narrowed its loss in the second quarter to 24 cents a share and said values of net contracts signed during the quarter jumped 56% year over year. The stock climbed 0.8%.
Shares of
MGM Mirage
(MGM) - Get MGM Resorts International Report
lost 2% after being removed from Goldman Sachs' conviction buy list. Goldman citied macroeconomic uncertainty but maintained its buy rating on the stock since it expects MGM to profit from an eventual turnaround in the Las Vegas market.
The Justice Department is taking a closer look at
Apple's
(AAPL) - Get Apple Inc. Report
strategies in the digital music market, according to a
New York Times
report. The stock ended 0.5% lower after trading in positive territory for much of the day.
Late in the day,
The Wall Street Journal
reported that the bankruptcy estate for
Lehman Brothers
brought a lawsuit against
JPMorgan Chase
(JPM) - Get JP Morgan Chase & Co. Report
, claiming that JPMorgan stripped Lehman of billions in its waning days using insider knowledge of Lehman's dire financial straits in its collateral calls.
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Commodities and the Dollar
Following the EIA data, crude oil for July delivery settled at $71.51 a barrel after adding $2.76.
Elsewhere in commodity markets, the June
gold contract finished higher by $15.40 to settle at $1,213.40 an ounce.
The dollar was trading higher against a basket of currencies, with the
dollar index up by 1%.
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Treasuries
The U.S. Treasury's $40 billion auction of five-year notes had a high yield of 2.13% and a bid-to-cover ratio of 2.71.
The benchmark 10-year Treasury fell 11/32, lifting the yield to 3.198%.
The two-year note weakened 1/32, raising the yield to 0.821%. The 30-year bond dropped 24/32, increasing the yield to 4.099%.
--Written by Melinda Peer and Sung Moss in New York
.
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