US Market ends lower on disappointing earning reports

A disappointing guidance from Fed-Ex and weakening dollar weighs on investor sentiment

 

US Market closed lower today, Thursday, 20 September, after two days of good rally. A couple of weak earnings from Bear Stearns and Circuit City coupled with the congressional hearing on the fallout in the sub-prime mortgage market, weighed on investor sentiment. Seven out of ten economic sectors posted losses today.

 

The Dow Jones industrial Average closed lower by 48.9 points at 13,766.7. The Nasdaq Composite Index, finished lower by 12.19 points at 2,654.29. S&P 500 finished lower by 10.28 points at 1,518.75.

 

Twenty out of thirty Dow stocks ended in red today. Home-Depot led the group of Dow laggards. Citigroup and Mercian Express followed Home-Depot. Boeing, Johnson & Johnson and AT&T led the group of Dow winners.

 

A disapponting guidance from FedEx regarding its full-year outlook served as the main profit-taking catalyst. Better than expected initial claims data and a stronger than expected Philly Fed Index, which is a regional manufacturing report, could not come to market's saviour.

 

Weakness in the dollar took a heavy toll on the Treasury market

 

When market opened in the morning, all the indices were trading lower. CircuitCity and Bear Sterns came out with disappointing results. But Bear Sterns results traded higher in the morning hours.

 

The weekly initial claims report was better than expected. But the dollar remained under pressure in the wake of the Fed's rate cut. Gold prices continued their upward journey, tacking on 2% today to $744.20/oz.

 

On Capitol Hill, central bank chief Ben Bernanke and Treasury Secretary Henry Paulson testified before a House panel on the mortgage markets situation. Bernanke warned that more delinquencies and foreclosures can be expected in the subprime, adjustable-rate mortgage market.

 

Goldman Sachs also reported its third quarter results, and it beat analysts' estimates by a huge margin. Shares of Goldman rallied on the news but lost momentum in the afternoon.

 

The weakness in the dollar took a heavy toll on the Treasury market where the 10-year note dropped more than a point, bringing its yield up to 4.70%.

 

Except for WNS Holdings, all Indian ADRs closed lower today. Infosys Tech was the biggest loser shedding 4.6% followed by Satyam who dropped 3.7%.

 

Crude crosses $83

 

Crude oil prices soared today and closed above $83/barrel for the first time today in New York. Prices rose to a record after the U.S. said that production in the Gulf of Mexico was shut in because of a storm threat. The Gulf is expected to shut down 28% of its total production. The Gulf accounts for about 25% of U.S. oil production.

 

As per the U.S. National Hurricane Center, a weak low-pressure system with the potential to become a subtropical storm as early as today has formed in the eastern Gulf. Crude-oil futures for light sweet crude for October delivery closed at $83.32/barrel (higher by $1.39/barrel or 1.7%) on the New York Mercantile Exchange. Futures touched $83.90, the highest intraday price till date. Prices are up 38% from a year earlier.

 

Trading volume hit nearly 1.3 million at the New York Stock Exchange, where declining stocks topped advancing issues more than 2 to 1. At the Nasdaq, almost 1.8 billion shares were traded, and declining stocks edged ahead of those advancing by 9 to 5.

 

Tomorrow investors will have no economic releases on the schedule.