Tough Day for Stocks

Wall Street's major indices all end lower by around 1%. FedEx falls after its forecast, while GM drops and weighs down the Dow.
Publish date:

Updated from 3:28 p.m. EDT

Stocks on Wall Street closed in the red Wednesday as traders digested a weak outlook from


(FDX) - Get Report

and a sharp drop in earnings at

Morgan Stanley

(MS) - Get Report



Dow Jones Industrial Average

slid 131.24 points, or 1.1%, to 12,029.06, and the

S&P 500

lost 13.12 points, or 1%, to 1337.81. The


surrendered 28.02 points, or 1.1%, to 2429.71.

The session got under way with quarterly results from the third investment bank of the week, Morgan Stanley, which topped profit estimates by 3 cents a share in the latest quarter. Still, that was down some 60% from a year earlier.

By comparison, on Monday

Lehman Brothers


said it lost nearly $3 billion in its most recent quarter, while

Goldman Sachs

(GS) - Get Report

easily surpassed estimates a day ago.

Regional bank

Fifth Third

(FITB) - Get Report

was also in the headlines after announcing that it will sell some businesses, offer $1 billion in preferred stock and substantially reduce its dividend. The stock slumped 27.3% to $9.26.

Paul Nolte, director of investments at Hinsdale Associates, said Fifth Third represents "another financial hitting the skids" and called Goldman Sachs' recent good news an anomaly.

"The rest of them are suffering," Nolte said. "The problems of subprime are still with them."

Elsewhere, FedEx posted a quarterly loss and offered disappointing projections for the fiscal first quarter and 2009, sending its shares down 2.1% to $82.60.

"FedEx has grown up to be a bellwether for transportation as a whole and how we're moving goods around the U.S.," said Nolte. The company's "earnings numbers and comments today certainly indicate that the economy is not on the mend."

Pessimism spread to the broader market, leaving all but four of the Dow's 30 components trading in the red. Leading the decliners,


(GM) - Get Report

gave up nearly 6%. This morning, Deutsche Bank cut its industry outlook for the auto sector.

Fellow automaker


(F) - Get Report

also sold off. The company met with billionaire investor Kirk Kerkorian's Tracinda Corp. to discuss restructuring plans.

Nearly across the board, consumer discretionary stocks such as


(WMT) - Get Report



(MCD) - Get Report

took a hit.

"The slowdown in retail spending is reflecting the fact that a lot of consumers have probably already spent the checks they already got from the administration," Fred Dickson, chief market strategist at DA Davidson, said. "Investors are getting the sense that the economy is slowing."

Dickson also pointed out that the market is in the middle of an options-expiration week, which means "price moves are amplified in the direction of the current price trend."

On the commodities side, crude for July delivery rose $2.67 to $136.68 a barrel, and Brent gained $2.72 to $136.44 a barrel.

President Bush today called on Congress to repeal a ban on offshore oil and gas drilling, while the Energy Department announced that crude oil supplies fell by 1.2 million barrels last week, less than analysts' estimate of closer to 2 million barrels. Gasoline prices at the pump retreated slightly, to $4.075 a gallon from $4.078.

Overseas, Asia's major markets were in the green overnight. Tokyo's Nikkei was up 0.7%, and the Hong Kong Hang Seng was better by 1.2%. Europe, though, was a different story, and most indices declined.