With traders expressing continued concerns about the outlook for the global economy, stocks saw notable weakness during trading on Wednesday. The losses on the day extended a recent downward move for the markets, with the major averages falling to their lowest levels in about a month.
The major averages ended the day firmly in negative territory, near their lows for the session. The Dow plunged 128.56 points or 1 percent to 13,344.97, the Nasdaq fell 13.24 points or 0.4 percent to 3,051.78 and the S&P 500 slid 8.92 points or 0.6 percent to 1,432.56.
The weakness on Wall Street was partly due to a negative reaction to earnings news from aluminum giant Alcoa (AA), which kicked off the earnings season after the close of trading on Tuesday.
While Alcoa reported third quarter results that exceeded analyst estimates, the company also lowered its forecast for global aluminum demand growth in 2012 to 6 percent from 7 percent. Shares of Alcoa tumbled by 4.6 percent on the news.
The release of results from Alcoa is seen as the start of earnings season, and the lower guidance led to worries about the possibility of disappointing forecasts from other companies.
Adding to the negative sentiment, oil giant Chevron (CVX) warned that it expects its third quarter earnings to be substantially lower than in the second quarter. Shares of Chevron fell by 4.2 percent.
Chevron said it expects upstream earnings to be hurt by foreign exchange losses and lower liftings and realizations, while timing effects, lower realized margin and the negative effects of several smaller unrelated items are expected to drag downstream earnings lower.
Meanwhile, traders largely shrugged off the release of the Federal Reserve's Beige Book, which said economic activity generally expanded modestly since the last report.
The report said consumer spending was generally reported to be flat to up slightly but also noted improvement in residential real estate conditions.
Conditions in the manufacturing sector were described as mixed but were said to have improved somewhat from the previous report.
While most of the major sectors moved to the downside on the day, substantial weakness was visible among electronic storage stocks. The NYSE Arca Disk Drive Index fell by 3.8 percent to its lowest closing level in well over two months.
Hutchinson Technology (HTCH) and NetApp (NTAP) turned in two of the storage sector's worst performances, falling by 4.7 percent and 3 percent, respectively.
Oil stocks also came under pressure on the day on the heels of the news from Chevron. A notable decrease by the price of crude oil also contributed to the weakness in the sector. With crude for November delivery sliding $1.14 to $91.25 a barrel, the NYSE Arca Oil Index fell by 1.8 percent.
Significant weakness was also visible among semiconductor stocks, as reflected by the 1.4 percent loss posted by the Philadelphia Semiconductor Index. Steel, networking, and biotech stocks also posted notable losses.
In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 2 percent, while Hong Kong's Hang Seng Index edged down by 0.2 percent.
The major European markets also moved to the downside on the day. While the German DAX Index fell by 0.4 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index slid by 0.5 percent and 0.6 percent, respectively.
In the bond market, treasuries turned higher over the course of the trading day after moving modestly lower in early trading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 2.9 basis points to 1.691 percent after reaching a high of 1.75 percent.
Trading on Thursday could be impacted by reaction to reports on the U.S. trade balance, weekly jobless claims, and import and export prices.
On the earnings front, Safeway (SFY) and Fastenal (FAST) are among the companies due to release their quarterly results before the start of trading on Thursday.
by RTT Staff Writer
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