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Dow has biggest 2 day drop in two years Original Source Link: (May no longer be active)
http://quote.bloomberg.com/apps/news?pid=10000006&sid=aCvVeUXZIzy0&refer=homehttp://quote.bloomberg.com/apps/news?pid=10000006&sid=aCvVeUXZIzy0&refer=home
U.S. Stocks Drop, Sending Benchmarks to 2005 Lows; GM Declines
April 14 (Bloomberg) -- U.S. stocks dropped for a second day, sending benchmark indexes to their 2005 lows, as falling commodity prices and a government report on business inventories fueled concern economic growth is slowing.
Companies most closely tied to the economy's performance, including Alcoa Inc. and General Motors Corp., led the retreat. Railroads such as Norfolk Southern Corp. dropped after JPMorgan downgraded the stocks, sending the Dow Jones Transportation Average to its biggest two-day loss in 2 1/2 years.
``It does feel like the economy is beginning to slow,'' said Michael Vogelzang, who oversees $5 billion as chief investment officer at Boston Advisors Inc. ``Most importantly, you've got earnings deceleration. The market has a really tough time making headway in that environment.''
The Dow Jones Industrial Average dropped 125.18, or 1.2 percent, to 10,278.75, a level not seen since Nov. 3. The Standard & Poor's 500 Index declined 11.74, or 1 percent, to 1162.05, its lowest since Nov. 4.
Apple Computer Inc. helped push the Nasdaq Composite Index to the lowest close since Oct. 26 as the company's forecast for sales trailed some analysts' estimates. The benchmark lost 27.66, or 1.4 percent, to 1946.71.
Almost six stocks fell for every one that rose on the New York Stock Exchange, the broadest selloff since Dec. 7. Some 1.9 billion shares changed hands on the Big Board, making it the second-busiest trading day this year.
Economic Growth
A drop in commodity prices and a report showing a smaller- than-expected gain in retail sales yesterday triggered concern that profit and economic growth may slow more than forecast. The S&P 500 today rounded off its steepest two-day decline since August.
A Commerce Department report today showed businesses built inventories at a slower pace in February. Diminishing demand may signal companies will limit orders to factories and add less to stockpiles, damping the economy. Economists have cut their growth forecasts for the third and fourth quarters, according to a survey conducted last week by Bloomberg News.
Alcoa, the world's biggest aluminum maker, dropped 50 cents to $29.90. An index of raw material shares retreated 2.8 percent for the worst performance among 10 industry groups in the S&P 500 as prices of commodities including copper fell.
Crude oil has declined more than 12 percent since touching a record $58.28 on April 4. Crude climbed 1.8 percent to $51.13 a barrel today.
`Rethink'
Oil's drop to the low $50-level ``is causing investors to rethink the leadership in this market,'' said John Waterman, who oversees $9 billion as chief investment officer at Rittenhouse Asset Management in Radnor, Pennsylvania. ``Investors haven't quite figured out whether they want to leave energy and materials yet, and haven't quite figured out where they want to go next.''
S&P 500 indexes of energy and materials shares have surged 36 percent and 7.9 percent, respectively, in the past year.
GM sank $1.67 to $26.66, its lowest since January 1993. The world's biggest carmaker and the United Auto Workers aren't renegotiating a contract to reduce health-care costs, Union Vice President Richard Shoemaker said. They will work within the framework of the current agreement to find savings, Shoemaker said. Health-care employee benefits add about $1,525 to the cost of each GM car and truck made in the U.S.
Norfolk Southern, the No. 4 U.S. railroad, lost $1.68 to $31.80, and Burlington Northern Santa Fe Corp., the biggest U.S. grain hauler, slid $3.11 to $48.28. The companies' profit margins may narrow next year as cargo capacity grows faster than demand, said JPMorgan analyst Gregory Burns. Burns cut both stocks to ``neutral'' from ``overweight.''
The Dow transportation average slumped 3 percent, extending yesterday's 2.7 percent loss, for the index's biggest two-day decline since October 2002.
Apple Declines
Apple, the maker of the iPod digital music player, dropped $3.78, or 9.2 percent, to $37.26, its steepest loss in almost three years. Third-quarter earnings will be 28 cents a share and revenue will rise to $3.25 billion. Analysts' highest estimates reached 32 cents on sales of up to $3.74 billion, according to a Thomson Financial survey. Apple's shares have almost tripled in the past 12 months.
S&P 500 companies are expected to post first-quarter profit growth of 8.3 percent, on average, down from 19.7 percent in the final three months of last year, Thomson data shows.
PepsiCo Inc. reported higher-than-expected first-quarter earnings, boosting its stock by $1.51 to $55.14. Profit rose to 53 cents a share on sales of $6.59 billion because of surging demand for soft drinks in China and India and lower-fat Frito-Lay snacks in the U.S. Analysts expected earnings of 50 cents, according to Thomson.
Kerr-McGee Surges
Kerr-McGee Corp. climbed $4.93, or 6.7 percent, to $78.90 for the biggest rally in the S&P 500. The oil producer will buy back $4 billion in stock at a premium to end a proxy fight with financier Carl Icahn.
In other economic news, jobless claims fell for a second straight week to 330,000, the Labor Department said, down from a revised 340,000 the prior week.
The S&P 500 shares, called Spiders, fell $1.53 to $115.77. Nasdaq-100 tracking shares, known by their QQQQ symbol, lost 51 cents to $35.55.
S&P 500 futures expiring in June dropped 15.50 to 1160.60 on the Chicago Mercantile Exchange. Nasdaq-100 Index futures tumbled 29 to 1441.
The Russell 2000 Index, which tracks companies with a median market value of $523 million, declined 1.8 percent to 591.94. The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, slumped 124.28, or 1.1 percent, to 11,429.62. Based on changes in the Wilshire, the value of stocks decreased by $149.1 billion.
Alcoa Inc. (AA US)
Apple Computer Inc. (AAPL US)
Burlington Northern Santa Fe Corp. (BNI US)
General Motors Corp. (GM US)
Kerr-McGee Corp. (KMG US)
Norfolk Southern Corp. (NSC US)
PepsiCo Inc. (PEP US)
Last Updated: April 14, 2005 17:33 EDT
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