U.S. Stocks Off to a Bearish Start

The three major indices open to the downside as traders assess the government's new plan to support the financial system and as earnings hit full stride.
Author:
Publish date:

Updated from 9:2 5 a.m. EDT

Stocks in New York slid at the open Wednesday, as traders took in a broad array of gloomy economic data and assessed a heap of earnings statements, including results from banking titan

JPMorgan Chase

(JPM) - Get Report

.

The

Dow Jones Industrial Average

was losing 134 points to 9177, and the

S&P 500

was lower by 26 points at 972. The

Nasdaq

stumbled 35 points to 1744.

On Tuesday, stocks finished with modest losses, as traders digested the Treasury Department's plan to take a $250 billion

equity stake in U.S. banks

. The government investment is part of the larger $700 billion Troubled Asset Relief Program to provide assistance to struggling financial firms.

Ahead of Wednesday's trading, the

Federal Reserve

said that

Pimco

, a unit of

Allianz

(AZ)

, would be the custodian of the government's Commercial Paper Funding Facility, which will buy three-month commercial paper to support money markets.

Credit markets continued to loosen as central banks across the globe flooded the markets with liquidity. Three-month dollar Libor, a measure of the rate banks charge one another for large loans, declined 9 basis points to 4.55%, its third straight decline.

Several financial firms also released quarterly results, many of which illustrated the deleterious impact of the credit crisis.

JPMorgan Chase

reported third-quarter profit that slid 84% year over year but nonetheless topped analysts' estimates. The decline in earnings came as JPMorgan saw $3.6 billion in asset writedowns and $640 million in losses related to its purchase of

Washington Mutual

.

Similarly,

Wells Fargo

(WFC) - Get Report

said its earnings slid 25% year over year, but the bank beat analyst expectations.

State Street

(STT) - Get Report

, on the other hand, reported an increase in third-quarter income.

Outside the financials, pharmaceutical concern

Abbott Labs

(ABT) - Get Report

said its earnings rose 51% year over year and raised its full-year earnings forecast.

Beverage firm

Coca-Cola

(KO) - Get Report

said its profit increased 14% year over year and trumped the Street's expectations.

Delta Airlines

(DAL) - Get Report

, meanwhile, swung to a third-quarter loss that the company attributed to rising fuel costs.

As for technology shares, chipmaker

Intel

(INTC) - Get Report

announced a 12% increase in third-quarter profit, but said its future performance was unclear.

Looking at the day's economic data, reports indicated that consumers were tightening their belts as core prices increased. The Census Bureau reported that retail sales were 1.2% lower in September, worse than a 0.4% decline in August. Economists had anticipated a drop of 0.7%. The decline in retail sales was the largest the U.S. has seen in three years. Excluding autos, the number fell 0.6%, a narrower decline than the 0.9% drop in August.

On the price side, the Bureau of Labor Statistics said that, as expected, its producer price index declined 0.4% in September, compared with a 0.9% decrease in August. However, the core reading, which subtracts food and energy, saw a 0.4% uptick, more than the 0.2% consensus estimate and up from 0.2% in August.

The New York Fed's manufacturing index for October fell to a record low of -24.6, down from -7.4 in September and much lower than -10 in August.

Later, investors will take in the Energy Information Administration's survey of crude-oil inventories for the week ended Oct. 11, and the Fed's so-called beige book of anecdotal economic data.

In commodities, crude oil was losing $3.08 to $75.55 a barrel, as OPEC cut its demand forecast for global oil demand for 2008 and 2009. Gold was falling $2.10 to $837.40 an ounce.

Longer-dated U.S. Treasury securities were rising in price. The 10-year note was up 10/32 to yield 4.04%, and the 30-year was gaining 12/32, yielding 4.25%. The dollar was rising vs. the euro but weakening against the yen and pound.

Overseas, European markets such as the FTSE in London and the DAX in Frankfurt were losing ground. In

Asian markets

, Japan's Nikkei closed slightly higher, while Hong Kong's Hang Seng finished with losses.