Stocks Start Week With Stumble


NEW YORK ( TheStreet) -- The major U.S. stock averages fell Monday with investors ill at ease about the possible outcome of a two-day meeting between European finance ministers and the World Bank's downgrade of China and East Asia's growth prospects.

Technology was again a headwind with Apple ( AAPL) losing more than 2%.

European finance ministers are meeting in Luxembourg on Monday and Tuesday. A potential financial aid request from Spain and the country's harsh 2013 budget plans were expected to be the focus as the permanent European Stability Mechanism goes into effect Monday.

"The decision to request financial assistance rests entirely with Spain," said Michala Marcussen, head of global economics, at Societe Generale. "The longer Spain delays, however, the greater the market pressure is likely to become."

The Dow Jones Industrial Average shed nearly 27 points, or 0.19%, to close at 13,584. The blue-chip index, which snapped a three-day winning streak, is still up 11.3% so far in 2012.

Losers outpaced winners within the Dow, 18 to 11 with Coca-Cola ( KO) finishing flat. The biggest percentage decliners were Hewlett-Packard ( HPQ), Home Depot ( HD), Verizon ( VZ), and Walt Disney ( DIS).

The biggest Dow gainers were American Express ( AXP), McDonald's ( MCD), and UnitedHealth ( UNH).

Cisco shares closed up 0.21% after Reuters reported that the networking giant has severed its sales partnership with China-based ZTE following an internal investigation that came after a Reuters report several months ago alleging that ZTE was selling banned computer equipment from Cisco and other U.S. firms to Iran's largest telecom company.

The U.S. House of Representatives Intelligence Committee warned Monday that ZTE and its Chinese telecom equipment peer Huawei Technologies pose a serious security threat to the United States.

Shares of UnitedHealth, the newest addition to the Dow, rose 0.82% after the company agreed to purchase 90% of Brazilian health care provider Amil Participacoes for roughly $4.3 billion.

Walt Disney shares fell 1.2% after the entertainment company was downgraded to average from above average by analysts at Caris, who said that the shares look fully valued.

The S&P 500 fell more than 5 points, or 0.35%, to settle at 1456, while the Nasdaq saw the steepest decline, dropping nearly 24 points, or 0.76%, to finish at 3112.

The weakest sectors in the broad market was technology, consumer cyclicals and conglomerates. The only groups in the green were transportation and utilities.

Volume totaled 2.32 billion on the Big Board and 1.19 billion on the Nasdaq. Losers ran ahead of winners by a 1.5-to-1 ratio on the New York Stock Exchange, and 1.8-to-1 ratio on the Nasdaq.

Apple ( AAPL) shares fell following reports that the company's iPhone manufacturer in China, Foxconn, suffered a production interruption after thousands of its workers went on strike over labor conditions.

There was also fresh speculation about the company's plans to launch an iPad Mini later this month with questions being asked how the potential for the product to cannibalize iPad sales during the holiday season.

International worries fueled some of Monday's selling though after the World Bank reduced China's growth outlook to 7.7% this year and 8.1% next year, down from the prior estimate of 8.2% in 2012 and 8.6% in 2013, though the bank noted that it still expects a soft landing for the country's economy.

The outlook for East Asia was reduced to 7.2% this year and 7.6% next year, below the prior forecast of 7.6% in 2012 and 8% in 2013, as the regional and global economy continue to be at risk of a number of headwinds relating to the eurozone and U.S. fiscal cliff.

The FTSE 100 in London closed down 0.50% and the DAX in Germany declined 1.44% Monday. The Hang Seng in Hong Kong closed lower by 0.89%. The Japanese market was closed for a public holiday.

November crude oil futures closed down 55 cents at $89.33 a barrel. December gold futures fell $5.10 to settle at $1,775.70 an ounce.

The dollar rose 0.32%, according to the dollar index. The Treasury market was closed because of the Columbus Day holiday.

The new earnings season kicks-off after Tuesday's closing bell with Alcoa's ( AA) release of its third-quarter results and expectations on Wall Street are low. According to Thomson Reuters, the sell side is expecting earnings for the S&P 500 to decline 2.4% year-over-year. The firm also noted the warning season has gone worse than normal this time around, suggesting more disappointment may lie ahead.

"In the short term, we may see a bit of a bounce in the markets as companies beat an already lowered bar. However, analysts are still predicting double digit earnings growth for 2013 which doesn't seem plausible to us given that sales growth is slowing and costs are beginning to rise," said Michael Simmons, managing director and partner at HighTower. "Combined with the uncertainty surrounding the fiscal cliff, we expect that guidance for the fourth quarter and beyond to be weak, which will lead to a further ratcheting down in analyst estimates."

The U.S. economic calendar was empty Monday.

In corporate news, shares of Green Dot ( GDOT), a prepaid card provider whose business greatly depends on Wal-Mart ( WMT) customers, plunged 20.3% after Wal-Mart announced its Bluebird payment and money management partnership with American Express ( AXP).

Allscripts Healthcare Solutions ( MDRX), the electronic health-records firm that is mulling a leveraged buyout, has received first-round bids from a number of private equity firms including Blackstone Group ( BX ), Carlyle Group ( CG ) and Silver Lake Management, Bloomberg reported, citing sources close to the situation. Shares of Allscripts popped 3.9%.

TPC Group ( TPCG ) shares climbed 12.8% after the petrochemical products producer was offered to be bought by specialty chemicals company Innospec ( IOSP ) for $44 to $46 in cash. TPC had earlier agreed to be purchased by First Reserve and S.K. Capital Partners for $40 a share and thinks that they will sweeten their offer after Innospec's proposal.

Facebook ( FB) plans to cut the $3 billion credit line it received before its May initial public offering to $1.5 billion, since the company won't be needing as much money now to pay for tax liabilities relating to the vesting of employee stock, given the steep decline in its share prices since the company's IPO, according to the Wall Street Journal.

The stock was downgraded to sell at BTIG Monday with analyst Richard Greenfield saying that "we see a growing tension between the Facebook user experience and monetization."

Facebook shares closed down 2.3%.

Affymetrix ( AFFX ) shares dove more than 15% after the life science company gave a third-quarter revenue forecast that missed Wall Street expectations, as weaker academic funding conditions hurt its gene expression and eBioscience businesses.


--Written by Andrea Tse and Joe Deaux in New York.

>To contact the writer of this article, click here: Andrea Tse.