U.S. Stocks Fall for Second-Straight Session on Europe -- FEC

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Date Posted: 19:34:06 07/23/12 Mon
Author: Debt Worries 18/5/2011 8/5/2007
Subject:

U.S. Stocks Fall for Second-Straight Session on Europe

U.S. Stocks Fall for Second-Straight Session on Europe Debt Worries
24/07/2012 6:33AM
--U.S. stocks tumble on intensifying Spanish bailout concerns

--European stocks plunge; yield on Treasury note hits new low

--McDonald's slides after reporting second-quarter results

By Matt Jarzemsky

NEW YORK--Investors dumped oil and stocks in a global selloff, running to the safety of U.S. Treasurys as concerns about Spain's debt problems intensified.

The Dow Jones Industrial Average fell 101.11 points, or 0.79%, to 12721.46, recouping most of a 239-point plunge the benchmark suffered shortly after the opening bell.

The Standard & Poor's 500-stock index slid 12.14 points, or 0.89%, to 1350.52. Shares of materials and consumer-discretionary companies led declines across all 10 of the index's sectors. The Nasdaq Composite Index skidded 35.15 points, or 1.20%, to 2890.15.

McDonald's retreated 2.9%, leading the Dow lower, after the fast-food chain reported a bigger-than-expected drop in second-quarter profit and warned of slowing same-store sales growth in July.

"The markets are realizing that it has been a fool's paradise lately," said Uri Landesman, president of Platinum Partners, a New York-based alternative asset-management firm that oversees $1.1 billion. "There's really bad news out there."

Crude-oil futures fell 4% to settle at $88.14 a barrel. The euro fell as far as $1.2067, a new two-year low against the dollar.

Buying in government debt, perceived to be safe, sent yields on such assets plunging. The 10-year U.S. Treasury note's yield traded at 1.436%, off a record low of 1.396% earlier in the day.

Six Spanish regions are set to request central government aid, according to a report from Spain's El Pais newspaper, following the Valencia region's statement Friday that it would ask for such support.

"With all the Spanish regions falling apart, how do you think the central government's doing? Probably not well," said Mr. Landesman.

Meanwhile, German weekly news magazine Der Spiegel reported the International Monetary Fund indicated it would no longer provide financial aid to Greece, sparking fears the country could run out of money as soon as September.

"If you're a bond investor, you have to move up on the credit-quality spectrum, move away from junk and high-yield," said David Joy, chief market strategist at Ameriprise Financial, which oversees $675 billion in assets.

"On the equities side, U.S. large-cap dividend-payers and defensive sectors, those are the places to be right now," he said. "It's not very exciting but it's certainly a safe haven compared with some of these cyclical areas."

European stocks also plunged, with the Stoxx Europe 600 sliding 2.5%. Spain's IBEX 35 index fell 1.1%, trimming losses after the country's financial regulator imposed a short-sale ban. Spanish borrowing costs rose to a euro-era high, with the country's 10-year bond recently yielding 7.44%.

Gold futures sank 0.3% to finish at $1,577.10 a troy ounce.

The Chicago Board Options Exchange Volatility Index, known as the VIX, jumped 13%, the biggest one-day climb in a month. The VIX, the stock market's best-recognized fear gauge, uses options prices for the S&P 500 to track expectations for future stocks swings.

Asian markets also fell as a result of euro-zone fears. China's Shanghai Composite fell 1.3% to its lowest close since March 2009. A senior central banker said over the weekend that he expected Chinese domestic demand to remain weak. Japan's Nikkei Stock Average lost 1.9%.

In the corporate arena, NRG Energy climbed 8.1%, the biggest increase among S&P 500 components, after saying it plans to buy smaller rival GenOn Energy, creating the largest competitive-rate power company in the U.S. GenOn jumped 26%.

Nexen surged 52% after the Canadian energy company agreed to be acquired by China's Cnooc for $15.1 billion in cash.

Halliburton rose 2.4% after the oil-services company reported better-than-expected second-quarter results.

Wet Seal slid 10% after firing its chief executive and saying it expects to report a deeper-than-expected second-quarter loss than previously forecast.

Write to Matt Jarzemsky at matthew.jarzemsky@dowjones.com.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

July 23, 2012 16:33 ET (20:33 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

Previous Stories
24/07/2012 6:06AM Nasdaq Falls 35.15 (1.20%) to 2890.15; Materials, Discretionaries Lead All Sectors Lower (headline only)
24/07/2012 6:05AM

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