Market Wrap: Stocks Drop on Global Economy, Earnings Concern

Dow Jones Industrials Average Falls Sharply
Andrew Burton via Getty Images

By Caroline Valetkevitch

NEW YORK -- U.S. stocks fell for a fifth straight session Thursday as bank results disappointed and investors fretted over the potential impact of global economic weakness on U.S. earnings.

Energy shares extended recent losses as oil prices settled down more than 4 percent after weak U.S. economic data spurred worries over oil demand. The S&P energy index fell 1.2 percent.

%VIRTUAL-pullquote-We're probably going to see slowing in the global economy, and it will be very difficult to sail through a global recession without getting touched.%"We're probably going to see slowing in the global economy, and it will be very difficult to sail through a global recession without getting touched," said Scott Colyer, chief executive officer of Advisors Asset Management in Monument, Colorado.

Suggesting further weakness may be ahead, the S&P 500 index closed below its 120-day moving average and ended for the first time in a month below the 2,000 mark, considered a psychological support level. The CBOE Volatility index notched a fifth day of gains, up 4.2 percent at 22.39.

Expectations for U.S. fourth-quarter earnings have been scaled back sharply, with growth now estimated at 3.5 percent, compared with an Oct. 1 estimate of 11.2 percent, according to Thomson Reuters data.

The S&P financial sector dropped 1.3 percent. Bank of America (BAC) lost 5.2 percent to $15.20, among the S&P 500's biggest drags, after the second-largest U.S. bank by assets reported a 14 percent slump in quarterly profit. Citigroup (C) shares fell 3.7 percent to $47.23 after its results.

The Dow Jones industrial average (^DJI) fell 106.38 points, or 0.61 percent, to 17,320.71, the Standard & Poor's 500 index (^GPSC) lost 18.6 points, or 0.92 percent, to 1,992.67 and the Nasdaq composite (^IXIC) dropped 68.50 points, or 1.48 percent, to 4,570.82.

%VIRTUAL-WSSCourseInline-975%The S&P is now down 4.7 percent from its Dec. 29 record high.

Adding to volatility, the Swiss National Bank scrapped its cap on the franc currency in a surprise move.

U.S.-traded Swiss stocks climbed. Credit Suisse (CS) was up 1.8 percent at $23.22 and Novartis (NVS) jumped 3.9 percent to $100.58 as a strengthening franc made U.S.-dollar denominated stocks cheaper.

Best Buy (BBY) shares tumbled 14.1 percent to $34.30 as the worst performing S&P 500 component. The electronics retailer expects same-store sales growth to be flat to negative in the first two quarters of its fiscal year.

After the bell, shares of Intel (INTC) fell 1.1 percent to $35.80 following its results.

U.S. producer prices recorded their biggest fall in more than three years in December, while other reports showed mixed signals for manufacturing in New York state and the mid-Atlantic region in January.

About 7.9 billion shares changed hands on U.S. exchanges, above the 7.3 billion average for the last five sessions, according to BATS Global Markets.

NYSE declining issues outnumbered advancers 1,995 to 1,091, for a 1.83-to-1 ratio; on the Nasdaq, 2,152 issues fell and 603 advanced for a 3.57-to-1 ratio.

The S&P 500 posted 27 new 52-week highs and 17 new lows; the Nasdaq composite recorded 30 new highs and 134 new lows.

-With additional reporting by Ryan Vlastelica and Chuck Mikolajczak.

What to watch Friday:

  • The Labor Department releases the Consumer Price Index for December at 8:30 a.m. Eastern time.

  • The Federal Reserve reports industrial production for December at 9:15 a.m.

  • The University of Michigan releases its initial survey of consumer sentiment for January at 9:55 a.m.

These selected companies are scheduled to release quarterly financial results:

  • Goldman Sachs (GS)

  • PNC Financial Services Group (PNC)

  • SunTrust Banks (STI)

  • Charles Schwab (SCHW)

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