Earnings concerns knock market down
NEW YORK — Stocks fell Monday, extending losses from the market’s worst week since November, as investors speculated Alcoa Inc. will kick off a disappointing earnings season.
Alcoa, the aluminum producer that began profit reports among Dow Jones industrial average companies Monday, dropped 6.9 percent as Deutsche Bank AG recommended selling the shares. Citigroup Inc. plunged 17 percent, the most in six weeks, on concern plans to combine its brokerage unit with Morgan Stanley’s will crimp future earnings. ConocoPhillips fell 2.9 percent after crude sank below $38 a barrel.
The Standard & Poor’s 500 index slipped 2.3 percent to 870.26, extending its 2009 slump to 3.7 percent. The Dow retreated 125.21 points, or 1.5 percent, to 8,473.97. The Nasdaq composite index fell 32.80, or 2.09 percent, to 1,538.79.
"The market is in the process of factoring in a worst-case scenario for earnings," said Dan Veru, chief investment officer at Palisade Capital Management in Fort Lee, N.J., which oversees about $2 billion. "The companies that are going to miss will miss by a wide margin."
The S&P 500 slumped 4.5 percent last week as companies spurred concern earnings will deteriorate, while the jobless rate in the U.S. climbed to the highest level in almost 16 years.
Alcoa lost 75 cents to $10.06. The shares slumped 11 percent last week after the company said it will cut 13 percent of its 107,000 employees and reduce capital spending by half. After the close of trading, Alcoa posted its first net loss in six years because of plunging prices and demand.
Citigroup plunged $1.15 to $5.60 for the steepest drop in the Dow. Citigroup may book a gain of as much as $10 billion by selling control of its Smith Barney unit to Morgan Stanley paydayloans.com.
Bank of America Corp. lost $1.56, or 12 percent, to $11.43. The lender that completed its purchase of Merrill Lynch & Co. earlier this month may post a $3.6 billion loss in the fourth quarter and slash its quarterly dividend.
JPMorgan Chase & Co. dropped $1.06, or 4.1 percent, to $24.91.
The Libor-OIS spread, the difference between the three-month London interbank offered rate, or Libor, for dollars and the overnight indexed swap rate, dropped to 98 basis points. The last time it closed below 100 basis points was Sept. 12, the final working day before Lehman Brothers filed for bankruptcy.
Get more business news, blogs and opinionS&P 500 energy shares declined 3.1 percent as a group as crude oil sank 7.8 percent to $37.65 a barrel in New York. ConocoPhillips retreated $1.52, or 2.9 percent, to $50.47. Exxon Mobil Corp., the world’s largest oil company, slipped 1.3 percent to $76.54, while Chevron Corp. retreated 2.8 percent to $70.82.
Harley-Davidson Inc. dropped 12 percent to $14.13.
Constellation Brands Inc. gained 25 cents, or 1.7 percent, to $15.14.
Filed under: economics by Pascal