MENAFN - ProactiveInvestors - Australia
Why the Dow tanked 128 points today
(MENAFN - ProactiveInvestors - Australia) Today's retreat in the U.S. market was a result of profit taking on a market that reached new heights in January.
Other factors for the retreat included: political events in Europe and the state of manufacturing in the U.S.
The Dow Jones closed at 13,881.08, down -128.71 or -0.92 per cent. The S@P 500 closed at 1,495.75, -17.42 or -1.15%.
Also affecting sentiment in the pullback were follow on revelations from last week where a Spanish newspaper published what it claimed were accounting statements suggesting rampant corruption among the country's ruling party.
The statements allegedly show that senior members of the Popular Party, including Prime Minister Mariano Rajoy, have received improper cash payments from construction companies every year since 1997.
Nearly all of its 30 component stocks are down today, dragging the overall index lower by 128 points.
Data released this morning estimated that U.S. factory orders rose in December, though less than forecast by economists.
The Department of Commerce said orders for manufactured goods increased by 1.8% in the final month of last year. Economists had predicted a gain of 2.2%.
Strangely, the increase was largely driven by defense spending, without which the factory orders rose only 0.3%.
Fourth-quarter GDP figures released last week were dragged down by a double-digit decrease in defense spending thanks to the brewing fight over the debt limit.
On Friday, the Dow finished above the 14,000 level for the first time since October 2007, on the back of jobs data. The primary driver of the gains was said not to be the 157,000 jobs created in January - which came in under expectations - but the upward revisions in the prior two months, as well as other economic data that showed signs of recovery overseas and at home.
Elsewhere Monday, The Treasury Department said the U.S. government now expects to borrow 331 billion in the January-March quarter, 11 billion less than previously forecast. In October, Treasury projected borrowing of 342 billion for the first quarter.
On the corporate front, earnings season in the U.S. began to wind down, with around half of the firms in the S&P 500 having reported so far. Another 90 S&P 500 firms will report this week, according to Deutsche Bank, accounting for 12% of the index's market capitalization.
Monday, Humana (NYSE:HUM) reported a fourth quarter profit that topped Street views, but revenue of 9.56 billion came in below projections for sales of 9.75 billion. Its shares rose almost 5% as the company affirmed its outlook.
Gannett Co. (NYSE:GCI) Monday said its fourth quarter profit fell 12%, but adjusted earnings topped analyst views on a "strong performance" in its broadcasting segment and as digital revenue across the company rose nearly 30 per cent. Its shares slid more than 5.7% on Monday.
After the bell, earnings are due in from Anadarko Petroleum (NYSE:APC) and fast-food restaurant operator Yum Brands (NYSE:YUM).
Highlights later this week include quarterly report cards from Walt Disney (NYSE:DIS) and Visa (NYSE:V), among others.
In other corporate news, Dell (NASDAQ:DELL) shares fell more than 2% after climbing on Friday following a Reuters report that the company was close to signing a potential buyout deal, with a possible deal on deck for after the closing bell.
The Wall Street Journal also reported today that investors would be offered a price of around 13.50 to 13.75 per share, citing unnamed sources, with reports the company is in negotiations with private equity firm Silver Lake and Microsoft (NASDAQ:MSFT).
Elsewhere, the New York Post reported that Herbalife (NYSE:HLF) is now under investigation by the Federal Trade Commission, after the company was accused of running a pyramid scheme by Pershing Square hedge fund manager Bill Ackman. The report said the FTC has received 192 complaints against the firm in the last seven years. Shares of the company lately rose 0.5% after dropping earlier this morning.
Tiffany & Co. (NYSE:TIF) shares slid after the jewelry company was downgraded to a neutral rating from buy by Monness Crespi Hardt on Monday.
On a similar note, Wal-Mart (NYSE:WMT) shed over 1% after J.P. Morgan Chase & Co. downgraded the retailer to neutral from overweight, and Merck (NYSE:MRK) fell after it was taken down to a market perform rating from outperform by Leerink Swann.
On the M&A front, Oracle Corp. (NASDAQ:ORCL) said it will buy Acme Packet Inc. (NASDAQ:APKT) in a deal with an enterprise value of 1.7 billion.
Gold futures settled higher Monday as the yellow metal's safe-haven appeal was strengthened by political drama in Spain and as reports hinted at a potential rise in demand from China.
Gold for April delivery advanced 5.80, or 0.4%, to 1,676.40 an ounce on the Comex division of the New York Mercantile Exchange.
March crude fell 1.60, or 1.6%, to settle at 96.17 a barrel on the New York Mercantile Exchange.
European markets finished sharply lower today with shares in France leading the region. The CAC 40 was down 3.01% while Germany's DAX was off 2.49% and Britain's FTSE 100 retreated by 1.58%.
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