US stocks plunged Tuesday on lingering concerns about the prospects of an economic rebound and worries second-quarter earnings would fail to lift sentiments on the Street.Although the second quarter began on a high note with stocks surging to multi-month highs, the rally lost steam in mid-June as a slew of bleak economic data failed to provide a direction.Last week’s shaky unemployment report added to mounting worries and investors pressed the sell button.Crude prices fell to their lowest in seven weeks.
The Dow Jones industrial average closed at its lowest level since April 28, plunging 161 points, or 1.9%, to close at 8,163.60.Among DJIA components, only four managed to register gains yesterday.The S&P 500 index dropped below its 200-day moving average, losing 18 points or 2%, to close at its lowest point since May 1.The Nasdaq declined 41 points, or 2.3%, to close at 1,746.17, its lowest close since May 27.Declining shares outran advancing issues on the NYSE by a four-to-one margin as trading remained seasonally light.
All ten industry groups on the S&P 500 ended lower, with only defensive areas of consumer goods and healthcare recording declines of less than 2%.Oil and gas issues fell 2.6% and technology stocks declined 2.5% as a number of ratings upgrades were ignored by traders. Industrials led the decliners with a 3.2% fall on concerns that the recent rally has gone ahead of any economic recovery.
Alcoa (NYSE:AA), which reports its earnings after today’s close, tried to brush aside analyst worries, advising it was optimistic about its sales, as the Chinese economy and US automotive industry begin to recover. Barclays (NYSE:BCS) raised its price targets on Exxon Mobil (NYSE:XOM) and Murphy Oil (NYSE:MUR). Furthermore, traders will look toward this week’s US and the International Energy Agency updates on demand forecasts, looking for indications of stabilization in their downward revisions.
According to Thomson Reuters (NYSE:TRI), analysts have lowered their second quarter earnings expectations to a 35.5% decline, inline with first quarter results.Basic material shares are expected to register a 79% earnings decline, versus a year ago, while energy companies are expected to report a 65% slide and financials a 53% drop.
Bank of America/Merrill (NYSE:BAC) also raised its ratings on a number of semiconductor shares, including Intel (NASDAQ:INTC), noting recent macro trends suggest a “definitive turn in end demand.” But Gartner Inc predicted a 6% fall-off in information technology this year. Financial stocks, however, are expected to face turbulence as a cautious Deutsche Bank (NYSE:DB) report estimates credit pressures likely to result in losses at ten of the sixteen banks covered.The report also estimates losses for the second half of 2009 and much of 2010.KeyCorp (NYSE:KEY), Marshall and Ilsley (NYSE:MI), SunTrust (NYSE:STI) and Zion Bancorp (NASDAQ:ZION) may show the weakest results.However, Wells Fargo (NYSE:WFC) is expected to benefit from strength in its mortgage and trading operations; Meanwhile, KBW upgraded KeyCorp (NYSE:KEY) shares noting the bank has now exceeded Treasury requirements following its capital raising.
Today’s calendar covers a G8 summit without Chinese President Hu Jintao who has rushed back home to attend to the Xinjiang crisis. Other items include the weekly MBA mortgage applications post, a 10.9% weekly gain, EIA Petroleum statistics, and consumer credit.
