U.S. stocks plunged on Tuesday, falling to their seven-week lows, on renewed fears that the recession is beginning to spread its tentacles. A large drop in existing home sales also disappointed investors and helped send benchmark indexes sharply lower.
The Dow industrials dropped 134 points, or 1.32%, to 10040.45. The S&P’s 500-stock index fell 15 points, or 1.45%, to 1051.87. The tech-heavy Nasdaq led the decliners with a drop of 36 points, or 1.7%. It closed at 2123. On the New York Stock Exchange, three stocks fell in price for every one that advanced. Volume picked up slightly.
However, housing sector shares benefitted on some brokerage reports that suggested the sector looks attractive at this point. Meritage Homes (NYSE:MTH) climbed 3%; KB Home (NYSE:KBH) rose 2.5%.
A stronger dollar once again weighed on shares of companies that derive a fair share of their revenues from overseas operations. Shares in Boeing (NYSE:BA) led the decliners, dropping 3.7%. Leading the decliners were Alcoa (NYSE:AA) off 3%, Caterpillar (NYSE:CAT), down 2.7%, Cisco (NASDAQ:CSCO), off 2.5% and United Technologies (NYSE:UTX) down 2.3%.
Eight of the ten S&P500 industry sectors closed lower on the day. Those on the top of decliners’ list were basic materials (-2.6%), industrials (-1.9%), consumer services (-1.6%), technology (-1.6%) and finance (-1.5%). Sectors considered defensive such as telecommunications (+0.1%) and utilities (+0.1%) managed some gains on the day. Medtronic (NYSE:MDT) plunged 10.8% after its earnings failed to match Street expectations and the firm trimmed its full-year outlook.
As equity prices continued their slide, safe haven instruments such as gold and Treasuries gained in price. Gold prices advanced $4.90 to $1,233.40. The price of 2-year notes rose 1/32, sending the yield to a record low of 0.46%. The yield on the 10-year plunged to its lowest in 16 months. The market’s measure of volatility, the CBOE Vix, jumped 7% to 27.45, the highest since early July.
After yesterday’s close, S&P lowered Ireland’s credit rating to AA-, giving it a negative outlook, noting the country faces mounting costs for its financial institutions.
Yesterday, President of Federal Reserve Bank of Chicago Charles Evans noted the chance of a double-dip recession has accelerated over the past six months, as unemployment and housing show no signs of returning to normalcy.
ALCOA INC (AA): Free Stock Analysis Report
BOEING CO (BA): Free Stock Analysis Report
CATERPILLAR INC (CAT): Free Stock Analysis Report
CISCO SYSTEMS (CSCO): Free Stock Analysis Report
KB HOME (KBH): Free Stock Analysis Report
MERITAGE HOMES (MTH): Free Stock Analysis Report
UTD TECHS CORP (UTX): Free Stock Analysis Report
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