Stocks Pummeled by Eurozone, Fiscal Cliff Worries

NEW YORK ( TheStreet) -- The major U.S. equity averages endured a sharp drop Thursday as fresh worries about the eurozone and fiscal cliff overshadowed upbeat domestic labor market and trade data.

Concerns about Greece's stability were back following a Bloomberg report that the European Union won't decide on whether to provide the next round of bailout funds for the country until sometime next week.

The Dow Jones Industrial Average finished down more than 121 points, or 0.94%, at 12,811, settling just above its session low.

The blue-chip index, which is now up 4.96% in 2012, suffered a steep loss on Wednesday, falling more than 2% to close below 13,000 for the first time since early August, in the wake of President Barack Obama's defeat of Mitt Romney in the presidential election.

Breadth within the Dow was again negative, with laggards ahead of gainers, 26 to 4. The biggest percentage losers among the blue chips were Cisco ( CSCO), McDonald's ( MCD), Home Depot ( HD) and United Technologies ( UTX).

McDonald's shares lost 2% after the fast food restaurant chain said its global sales fell 1.8% in October, hit by the combination of an uncertain economy and stiff competition. This was the company's first monthly sales decline since March 2003.

Shares of Dow components JPMorgan Chase ( JPM) and Walt Disney ( DIS) were also weak.

JPMorgan shares dipped 0.17% after the bank said it's been given Federal Reserve approval to restart stock repurchases in the first quarter of 2013 through a capital plan that would also permit ongoing dividend payouts.

Walt Disney slid 0.08% ahead of the company's fiscal fourth-quarter results. After the close, Disney reported a profit of 68 cents a share on revenue of $10.78 billion for the September-ended quarter vs. Wall Street's estimate for earnings of 68 cents a share on revenue of $10.92 billion. The stock was down 2% in extended trades.

The Dow's gainers were Bank of America ( BAC), Boeing ( BA), Hewlett-Packard ( HPQ), and Travelers Cos. ( TRV).

The S&P 500 shed more than 17 points, or 1.22%, to close at 1377.51, while the Nasdaq was under the most pressure, falling nearly 42 points, or 1.42%, to close at 2896.

Decliners finished ahead advancers by a 2.7-to-1 ratio on the New York Stock Exchange and a 2.8-to-1 ratio on the Nasdaq. Volume totaled 3.77 billion on the Big Board and 1.88 billion on the Nasdaq.

All sectors closed in the red with capital goods, energy, services and technology seeing the deepest declines.

Apple ( AAPL) shares slumped another 3.7%. The tech giant has fallen 20% from its mid-September high and is now officially in bear market territory, according to Schaeffer's Investment Research, amid growing concerns about the company's perceived lack of innovation.

Thursday's economic data was mostly positive. The Census Bureau said the U.S. trade deficit narrowed to $41.5 billion in September, down from the previous deficit figure of $43.8 billion that was revised from $44.2 billion. A trade deficit of $45 billion was expected for September.

"There were good economic numbers today," said Peter Cardillo, chief market economist at Rockwell Global Capital. "The trade deficit shrank as opposed to showing an increase. Narrowing bodes well for economic activity this quarter."

"Psychologically the market is going to take some time to repair yesterday's damage ... the next four or five days before we begin to consolidate," he added. "The market is focused very much on the fiscal cliff right now. I'm looking at some kind of agreement on the extension of tax cuts -- more or less another patch job. Eventually it will be worked out. In the meantime, the market is going to be subject to that fear factor of the fiscal cliff, and of course Europe."

Also, The Labor Department reported that initial jobless claims for the week ended Nov. 3 fell by 8,000 to a less-than-expected 355,000 from the previous week's unrevised figure of 363,000. On average, economists were expecting the figure to rise to 370,000.

"This is hard to read ... claims we dismiss as Sandy impacted and so are likely to rise in weeks to come," noted David Ader, a strategist at CRT.

The four-week moving average was 370,500, an increase of 3,250 from the previous week's unrevised average of 367,250.

Continuing claims in the week ended Oct. 27 fell by 135,000 to 3.127 million, from a downwardly revised 3.262 million. Economists were expecting continuing claims of 3.253 million.

Overseas, the European Central Bank stood pat on its benchmark interest rate of 0.75% Thursday amid deepening concerns about the eurozone economy and as Spain continued to refrain from requesting a bailout that would trigger ECB bond-buying.

"While the ECB apparently stands ready to buy peripheral governments' bonds, President Mario Draghi gave little assurance on Thursday about when it might start or how many it might purchase. He also ruled out writing off any of Greece's debt and gave no firm indication of any other policy support to come," said Jennifer McKeown, an economist at Capital Economics. "In all, we think that the press conference was somewhat disappointing."

As expected, the Bank of England held off on additional quantitative easing for now amid some recent upbeat economic data, though more stimulus looked to be a possibility in the near future amid doubts of a sustained economic recovery.

The U.K. Monetary Policy Committee decided to keep the key interest rate at a record low of 0.5% and the size of the bond-buying program at 375 billion pounds.

Also, the Greek parliament on early Thursday passed by a narrow margin a new, tough austerity package that triggered mass protests on the streets of Athens but was required to help bring more financial aid to the country.

Despite this, German Finance Minister Wolfgang Schaeuble said that a decision on releasing the bailout funds will unlikely be reached next week.

"Despite the rather close passage of austerity measures by the Greek parliament, eurozone leaders have already warned that the work is far from done," said Geoffrey Yu, a currency strategist at UBS.

Investors were also keeping an eye on China's big leadership change, which could be a more significant event for emerging economies than the re-election of Obama.

"The installation of a cohesive Chinese leadership committed to putting the economy on a more sustainable footing would create opportunities for consumer goods producers while also signaling an end to the global commodity boom," said Mark Williams, an economist at Capital Economics.

Overseas markets finished lower. The FTSE 100 in London closed down 0.27%, while the DAX in Germany finished off 0.39%. Japan's Nikkei average settled down 1.51% on Thursday and Hong Kong's Hang Seng closed behind by 2.41%.

Gold for December delivery added $12 to settle at $1,726 an ounce at the Comex division of the New York Mercantile Exchange, while December crude oil contracts rose 65 cents to close at $85.09 a barrel.

The benchmark 10-year Treasury rose 14/32, diluting the yield to 1.623%. The dollar slipped 0.01%, according to the U.S. dollar index.

In corporate news, CBS ( CBS) shares rose 1.1% after the media company booked better-than-expected first-quarter earnings as a fall in advertising sales was balanced by revenue from areas including content and licensing fees.

Shares of Wendy's ( WEN) tacked on 3.1% after the fast-food chain announced a wider-than-expected third-quarter net loss, but revealed that sales at restaurants opened at least 15 months increased 2.7%, pointing to a sixth straight quarter of growth.

Lawn and garden care products company Scotts Miracle-Gro ( SMG) reported a slightly wider-than-expected fourth-quarter loss and less-than-expected revenue as its company-wide gross margin rate weakened from a year ago due to higher material costs and unfavorable conversion costs, and the operating loss for its global consumer segment widened from a year earlier. The stock lost 4.2%.

Shares of Dean Foods ( DF) gained 2% after the company beat third-quarter earnings estimates and hiked its full-year earnings guidance to between $1.27 and $1.32 a share, driven by continued strong momentum across the business, offset by the impact of rising commodity costs, particularly at Fresh Dairy Direct.

Department store operator Kohl's ( KSS) announced that it now expects full-year earnings of $4.52 to $4.60 a share for fiscal 2012 versus its previous guidance of $4.50 to $4.65 a share. The company posted better-than-expected third-quarter results as same-store sales increased 1.1%. Shares slid 5.1%.

Shares of Groupon ( GRPN) were losing nearly 16% in after-hours action after the online deals company posted a surprise loss for the third quarter as revenue of $568.6 million fell short of analyst expectations of $590.1 million.

Qualcomm ( QCOM), the chip maker, easily beat Wall Street's consensus profit view on Wednesday and forecast non-GAAP earnings of $1.08 to $1.16 a share on revenue ranging from $5.6 billion to $6.1 billion for its fiscal first quarter. Shares popped 4.3%.

Whole Foods Market ( WFM) reported an in-line profit for its fiscal fourth quarter and announced Wednesday it raised its quarterly dividend by 40% to 20 cents a share. Shares slumped 5.9%.

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

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

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