U.S. Stocks Down In Continuation Of Thursday's Drop
NEW YORK (MarketWatch) - The Dow Jones Industrial Average on Friday headed towards a 3% loss for the week as stock prices fell for a second day as ongoing worries about deal-financing overshadowed largely positive economic data.
"It really is the same dynamics playing out today, ongoing concerns regarding credit, and the reduction of deal activity, which has been a significant catalyst for equities," said Mike Malone, trading analyst at Cowen & Co.
Word that Cadbury Schweppes was delaying the sale of its U.S. beverage unit "further supports investor concerns surrounding issues manifesting themselves in credit," Malone said.
The Dow Jones Industrial Average was off 132.7 points at 13,420.3, with 26 of its 30 stocks now on the decline, led by Exxon Mobil Corp. , which was off 1.1%, and American International Group Inc. , which fell 1.2%.
Dow's advancing stocks included 3M Co. , which was up 0.5 % after reporting a rise in second-quarter profits and its guidance, and Boeing Co. , up 1.2%.
Financial fallout
Private-equity firm Blackstone Group LP and hedge fund Fortress Investment Group summed up the tougher climate for financing deals. Shares of Blackstone fell 4.5%, while Fortress was ahead 3% after trading in the red for much of the day.
Beyond American International, two of the Dow's other three financial stocks were on the decline, with shares of Citigroup Inc. off 0.8%, and American Express Co. down 1.3%. J.P. Morgan Chase edged up 1.7%.
"Fresh hedge fund 'troubles' rumors have apparently been doing the rounds and may be amplifying the swings on both Treasuries and stocks this morning," analysts at Action Economics wrote in a note.
"It would actually be surprising if there weren't hedge fund troubles after the recent surge in volatility and asset allocation swings, but some are speculating that it may be Basis Capital from Australia, which has been one of the oft repeated names of late," they said.
The S&P 500 was down 12.3 points at 1,470, while the Nasdaq Composite fell 21.4 points to 2,577.
On the New York Stock Exchange, 1.9 billion shares were traded, while 2.4 billion shares were exchanged at the Nasdaq.
At the NYSE, declining stocks beat advancers, 2-1, and by about the same on the Nasdaq.
Thursday's trading featured a 311-point loss for the Dow, its second-biggest plunge this year, and major losses for the other major averages, as worries about deal-financing and the housing market shook the market.
"The market had a horrible day yesterday. It will take at least a few days to stabilize," said Peter Cardillo, chief market economist at Avalon Partners.
Spreads between credit-default swaps on high-yield bonds and U.S. Treasury bonds rose past key levels, according to Markit Group, which measures that data.
New government data showed the strongest advance for the economy since early 2006. The Commerce Department said gross domestic product in the last quarter rose 3.4%, up sharply from the 0.6% advance seen in the first quarter.
However, the growth level did not meet expectations. Analysts polled by MarketWatch had expected a 3.6% advance.
The mood of consumers brightened in July, as gasoline prices fell and markets hit nominal highs, with a measure of consumer sentiment rising to 90.4 from 85.3 in June, Reuters and the University of Michigan reported Friday.
Earnings news
Shares of Amgen Inc. fell 1.5%. Amgen also said the recent acquisitions of Alantos and Ilypsa had reduced its full-year earnings forecast to $4.28 a share from $4.30 a share.
ITT Corp.'s second-quarter profit jumped 52% to $213.7 million, or $1.16 a share, from $140.9 million, or 75 cents a share in the year-ago period. Results also beat expectations. The stock was down 1.8%.
Chevron Corp. was off 1.3% after an earlier rise. The company's second-quarter profit was 24% aboe year-earlier levels and exceeded analysts' expectations.
Ingersoll-Rand Co. tripled its quarterly profit, in part due to a special gain. Earnings excluding the gain were in line with estimates. The stock fell 4.08%.
Fortune Brands Inc. saw a 6% decline in profit in the latest quarter, but the results beat expectations. Its stock rose 4.3%.
Deal news
Medtronic Inc. is going to buy Kyphon for $3.9 billion, The price represents a 32% premium to Kyphon's closing price of $53.68 on Thursday and a 35% premium to the 30-day average trading price.
Crude up, gold down
Treasury prices closed a tad higher, pressuring yields lower, amid new rumors about possible hedge fund worries linked to the subprime sector. The benchmark 10-year note ended 1/32 at 97-25/32, with a yield of 4.788%.
The dollar rose across-the-board, recouping some losses from the previous day amid global worries about a credit crunch. In New York trading, the euro stood at $1.3658, compared with $1.3744 late Thursday. The greenback stood at 118.95 yen, vs. 118.76 yen.
Gold futures extended losses from prior sessions. Gold for August delivery fell $1.30 at $661.50 an ounce on the New York Mercantile Exchange.
Crude futures climbed, with September crude closing at $77.02 a barrel, its highest level since mid-August of last year. The contract was up 2.8% for the session and 1.6% for the week as supply and demand concerns returned.
By Kate Gibson