Dow takes nosedive, closes below 13,000

5:00 PM 13000, below, closes, nosedive, takes No Comments

JeeYeon Park , CNBC

Stocks took a sharp nosedive in a post-election selloff Wednesday, with the Dow logging its biggest decline in nearly a year, prompted by concerns over the looming "fiscal cliff" and amid renewed worries over Europe's weak economy.

The Dow closed below 13,000 for the first time since early August, while the S&P 500 finished below 1,400.

“It’s now how quickly we can focus on the ‘fiscal cliff’ and coming up with a resolution—that's certainly the next item on the agenda for the market,” said Art Hogan, managing director of Lazard Capital Markets. "And you still have Europe."

The Dow Jones Industrial Average was down more than 300 points in its biggest one-day drop in almost a year, dragged heavily by Bank of America and JPMorgan.

The S&P 500 and the Nasdaq also finished sharply lower. The CBOE Volatility Index, widely considered the best gauge of fear in the market, jumped near 19.

All key S&P sectors ended firmly in the red, led by energy and financials.

Apple fell more than 3 percent, pushing the tech giant down a jaw-dropping 20 percent from its all-time high of $705.07 in mid-September. The stock is now trading in bear market territory.

Obama was re-elected president Tuesday night, put over the top by the crucial battleground state of Ohio following the most expensive election in U.S. history.

Meanwhile, ratings agency Fitch said Obama needs to move quickly to avoid the "fiscal cliff," adding that failure to address the issue would likely result in a downgrade in 2013. Moody's said it would make a decision following the budget negotiations, though going over the "fiscal cliff" would not immediately trigger a downgrade.

Wall Street had favored Romney and the Republican ticket in part because it preferred their approach of retaining tax cuts, and making spending cuts. The Obama Administration favors raising taxes on the richest Americans, and also increasing capital gains and dividend taxes.

Across the pond, European shares reversed their gains to close sharply lower following ECB President Mario Draghi's negative comments on the region's economy. Draghi said economic activity in the euro zone area is expected to remain weak and the slowdown may have reached Germany.

And the members of Greece’s parliament are expected to vote on a new package of austerity measures with the government’s majority under threat. If the bill doesn’t pass, Greece will not receive its next financial aid installment of 31.5 billion euros ($40.2 billion) on Monday.

“The U.S. election temporarily flipped worries over Europe, but Europe still has an important role in global markets,” said Quincy Korsby, market strategist at Prudential Financial. “They’ve obviously been a chronic condition, but it’s flare ups like today that grab attention.”

Among earnings, Macy's reported a higher profit, thanks to sales gains, and the department-store chain also boosted its full-year earnings guidance.

Time Warner edged higher after the media company posted better-than-expected earnings.

And Kraft Foods struggled to hold gains even after the newly independent food manufacturer reported a higher profit and affirmed its 2013 outlook.

Qualcomm, CBS and Activision Blizzard are among companies slated to post earnings after the closing bell.

Treasury prices slipped from session highs after the government auctioned $24 billion in 10-year notes at a high yield of 1.675 percent. Bid-to-cover was 2.59.

On the economic front, weekly mortgage applications declined last week as Hurricane Sandy battered the East Coast and disrupted normal business activity, according to the Mortgage Bankers Association.

And consumer borrowing expanded by $11.36 billion in September, according to a Federal Reserve report. Economists polled by Thomson Reuters expected a gain of $10.1 billion.

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Dow surges past 13,000 on stimulus hopes

2:30 PM 13000, hopes, stimulus, surges No Comments

Brendan McDermid / REUTERS

Traders work on the floor of the New York Stock Exchange.

At 4: 05 pm ET updated: Stocks rallied Friday on growing hopes for further stimulus from the Federal Reserve and the European Central Bank, as economic growth slowed in the second quarter.

The Dow Jones industrial average closed the day up 188 points, after moved for the first time in more than two months over 13,000. It was the Dow fifth triple-digit move in the last six days.

, Gross domestic product spent growth pace slowed economic news at an annual rate of 1.5 percent in the second quarter as consumers in their very slow in a year. While economists expected worse, it was weak enough to for a further round of fed stimulus to keep alive the hope.

The Federal Reserve meets next week, and the market is looking for signs of additional monetary stimulus. The ECB also met with expectations for action overseas also increases after comments Thursday from ECB Chairman Mario Draghi.

"It still excitement about a possible change in policy, both the ECB and the FOMC." This is the only reason the market high,'s ", said Ken Polcari, Managing Director of ICAP shares in New York."

Merck, the largest thrust gave the Dow the Drugmaker reported better than expected quarterly results, with strong growth in sales of vaccines and treatments for diabetes and HIV.

On Thursday, stocks jumped nearly 2 percent and delete most of the losses for the week as ECB chief Mario Draghi said that he would do what it takes to save the euro. Adding fuel to the fire, which reported French daily Le Monde on Friday morning the euro zone Governments and the ECB prepare to take in order to reduce the borrowing costs for Spain and Italy.

URI Landesman, President of Platinum to partners in New York, described the market as "always frothy," adding that "the bulls their last breath try because Draghi says he is some bonds to buy."

"The problem is much too deep for central banks to dig us out, and that is noticeable in the news and the market in the next few months," Landesman said. "I expect a really rough rest of the summer."

Facebook Inc shares fell after a day to an all-time low the social media company reported a drastic slowdown in sales growth on Thursday and failed, offer financial forecasts, which suppressed fears about its ability to stimulate advertising growth.

On the other hand, Amazon rose shares after it reported improved profit margins on Thursday after the Bell.

Optimism about additional stimulus measures has a mixed U.S. corporate earnings offset season, with many companies profit forecasts, but often missing revenue projections and warning of sluggish global growth hit helped.

About two-thirds have been, expectations of analysts based on data from Thomson Reuters, until Friday morning, the 290 S & P 500 that have reported earnings in the second quarter.

Starbucks Corp cut its Outlook for the current quarter, citing global economic weakness and a recent slowdown during visits to the coffee shops in the United States, the biggest market for revenues and profits.

Reuters contributed to this report.

-New GDP figures were today not stellar means, that the Fed will step to stimulate the economy? Steven Ricchiuto, Mizuho Securities, weighs.

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Investors get bullish as Dow nears 13,000

2:35 PM 13000, bullish, investors, nears No Comments

Traders Patrick Casey, left, and Fred DeMarco work on the floor of the New York Stock Exchange.

With the Dow Jones industrial average flirting with 13,000 -- a level not seen since May 2008 -- even "Dr. Doom" is stepping back from the ledge.

“We’re a believer; we’re celebrating," said Gina Sanchez, director of equity and allocation strategy for Nouriel Roubini, the New York University economist, dubbed “Dr. Doom” for his many pessimistic forecasts about the global economy.

"We think the rally has legs,” Sanchez told CNBC.

Many investors appear to feel the same way.

The widely followed index of 30 blue-chip stocks has defied forecasters to surge more than 5 percent since year-end, including the best January since 1997. The Dow has retraced over 80 percent of its bear market slide from 2007 to early 2009, Reuters reports, and is just about 10 percent away from its all-time high hit in October 2007.

“13,000 is not just a number; it’s a psychological trigger that could cause the market to drop or bring more buyers in to drive it higher,” said David Bach, a personal finance expert and author. 

Bach points to data that show the broad Standard & Poor’s 500 index, is up 23 percent from its October low.

“That’s a startling run,” Bach said. “There’s a good chance that the average person’s retirement portfolio is up at least 10 percent. But many retail investors have probably missed out on this rally because they have been putting money in safe investments like Treasury bonds, municipal bonds and corporate bonds over the past several months.”

Bach expects the rally in equities to continue, noting that corporate earnings are improving, payrolls are growing and American consumers, who have spent the past three years paying down debt, are feeling confident about borrowing and spending again. He also points to "frugal fatigue," saying consumers are ready to start spending a bit more freely again after being changing their habits in the aftermath of the Great Recession.

“People have had their heads down in this bad economy over the past few years, and now they’re coming back up for air,” he said. “That means they’re spending money again, and we see that in such metrics as growing car purchases and retail spending numbers.”

Hugh Johnson, chief investment officer of Hugh Johnson Advisors in Albany, N.Y., notes that a number of indicators are coming together and driving stocks higher.

There are signs that the sovereign default problems in Europe may be abating, and investors, buoyed by improving data on the U.S. economy, are buying up economically sensitive stocks in sectors such as technology and finance, and also small- and mid-cap stocks, he said.

“All the signs are pointing to investors taking on more risk. Why? Because the economic numbers are improving, and that’s the story here. The markets and the economic numbers are moving in sync, and that’s encouraging,” Johnson said.

Jim Paulsen, chief investment strategist at Wells Capital Management, is also bullish about the outlook for the market. Appearing on CNBC Wednesday, he pointed to a steady growth in bank loans, a sustained rise in employment and early indications of a recovery in the housing market.

“I think we might he on the front end of sustained upward move in confidence in this country, and confidence sustains valuations.” Paulsen said.

However, other market analysts expressed caution. Brian Kelly, Shelter Harbor Capital co- founder, said that, since the stock market is up over 20 percent from its low, this is not a time to buying stocks “hand over fist.”

“Buy stocks on a pullback, but be cautious here,” he said on CNBC. “There are things that can always surprise us on the negative side.”

Indeed, even Roubini’s bullishness on the market is short-lived.

His company thinks markets will be buoyed by central bank policies to keep rates low over the next few months, which will lead investors to buy stocks. But in the second half of the year the rally could fade. “We expect to end the year lower from where the market is now,” Sanchez told CNBC.

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