Closing Bell: Stocks Recover After Selloff, But Still End in the Red

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China slump, higher bond yields weigh on markets
Richard Drew/AP
Wall Street began the week in skittish fashion. An overnight nosedive by Chinese stocks sent shockwaves through global markets and triggered a selloff after the opening bell, sending the Dow down 254 points, or 2 percent. Stocks recovered but still closed in the red. The Dow lost 140 points to end at 14,660, the S&P 500 dropped 19 points to finish at 1,573, and the Nasdaq gave up 36 points to close at 3,320.

Aside from the policies of the People's Bank of China, investors were concerned about interest rates, which the Fed has kept artificially low since 2008 in order to encourage borrowing. The yield on the 10-year Treasury note is up sharply since Fed chairman Ben Bernanke last week suggested that the central bank could begin to taper its bond-buying program in the near future. The 10-year Treasury yield, which reached its highest level in almost two years on Monday before falling back down somewhat, serves as a benchmark rate for loans including home mortgages.

Trying to allay fears about the short-term future of monetary policy, Federal Reserve Bank of Dallas President Richard Fisher told the Financial Times that Wall Street had overreacted to Bernanke's comments. In fact, Fisher said investors behaved like "feral hogs" after the chairman spoke on June 19, according to Bloomberg. Fisher supports reductions in bond-buying if current economic progress continues.

Some companies and stocks that made news Monday:
  • Financial stocks slumped in the wake of the Chinese central bank's announcement that it will continue its tight-money policy. Citigroup (C) and Bank of America (BAC) both lost more than 3 percent to close at $45.44 and $12.30, respectively, while JPMorgan Chase (JPM) was down 2 percent to $50.92. Citi also announced plans to open an office in Iraq, which would make it one of few U.S. financial firms with a presence in that country.
  • Apple (AAPL) lost almost 2.7 percent, ending at $402.54 after briefly dipping below the $400 mark for the first time since April. An analyst at Jefferies cut his price target on the company's shares to $405 from $420, citing diminished production levels for the iPhone, and reduced his full-year earnings and revenue estimates. In other bad news for Apple, Global Equities Research said that low morale is causing employees to leave, according to Bloomberg.
  • Tenet Healthcare (THC) rose 4.5 percent on news that it will acquire Vanguard Health Systems (VHS) in a deal valued at nearly $4.3 billion (including debt).
  • The day's biggest winner, by far, was hard-drive market STEC (STEC), which soared 87% on news that Western Digital (WDC) will buy it for $340 million. Western Digital dropped 3 percent.
  • Facebook (FB) sank more than 2.4 percent in the first day of trading after the company admitted to a data breach that compromised the contact information of 6 million users.
  • The Financial Times reports that Dell (DELL) has rejected a buyout bid by activist investor Carl Icahn. The computer maker's independent committee of directors found that Icahn's plan had a "$2.9 billion funding shortfall" and would return less money to investor than it claimed. A shareholder vote on the offer is scheduled for July 18.
And here are some things to watch for Tuesday:
  • Durable goods orders for May are out at 8:30 a.m. from the Commerce Department, and the S&P/Case-Shiller Home Price Index for April will be released at 9 a.m. According to economists surveyed by Bloomberg, both reports may show continued recovery.
  • New home sales for May are out at 10 a.m. from the Commerce Department.
  • The Consumer Confidence Index for June from the Conference Board comes out at 10 a.m.
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