U.S. stocks fall as hopes for Europe falter
U.S. stocks closed with steep losses amid reports that a key meeting of Europe's finance ministers was canceled. The Dow fell 207 points to 11706 as poor corporate earnings felled U.S. stocks.
New York — U.S. stocks closed with steep losses Tuesday after disappointing corporate earnings and reports that a key meeting of European financial ministers had been canceled. Assets that tend to hold their value in a weak economy like U.S. government debt and gold rose.
The Dow Jones industrial average lost 207 points. It had gained 409 points over the previous three days.
Manufacturing conglomerate 3M cut its 2011 earnings forecast, and U.S. Steel warned that demand for its products could slow. Netflix Inc. plunged 35 percent after the company cut its profit forecast and said it is losing subscribers following a price increase in July. After the market closed, Amazon Inc. plunged 17 percent after its earnings came in far below Wall Street's forecasts.
The market was also pulled lower by a report that consumer confidence plunged in October to the lowest level since March 2009. The Conference Board index measures how shoppers feel about business conditions, the job market and their outlook for the next six months.
"It's hard to parse this data and find any way that you can glean something positive about it," said Tim Speiss, vice president at EisnerAmper Wealth Planning.
The Dow fell 207 points, or 1.7 percent, to close at 11,706.62. 3M fell 6.3 percent, the largest drop among the 30 stocks that make up the Dow average.
The Standard & Poor's 500 index fell 25.14, or 2 percent, to 1,229.05. The Nasdaq dropped 61.02, or 2.3 percent, to 2,638.42. The losses turned the Nasdaq negative for the year once again. A rally Monday left the index up 1.8 percent for 2011.
Small company stocks fell far more than the broader market, a sign that investors were shunning assets perceived as being risky. The Russell 2000, an index of small companies, plunged 3 percent, reversing a gain of 3.3 percent Monday.
Prices for assets seen as stable stores of value rose. The yield on 10-year Treasury notes fell to 2.14 percent from 2.23 percent late Monday. Bond yields fall when investors send their prices higher. Gold rose 2.9 percent.
The latest headlines from Europe cast doubt over whether leaders there can agree on a comprehensive solution for the region's debt crisis in time for a summit Wednesday. Europe's ongoing debt crisis has been behind much of the market's big moves lately.
European officials are working to patch together a plan that will prevent banks from taking huge losses if the Greek government defaults on its bonds. A messy default could lead to a credit freeze-up similar to the one in 2008 following the fall of Lehman Brothers.
Anticipation of a solution to Europe's debt mess and strong profit reports from Caterpillar Inc., McDonald's Inc. and other major U.S. companies helped the S&P 500 surge 14.1 percent from Oct. 3, when it slumped to its lowest point of the year, through Monday's close. Traders warn that if European leaders fail to come up with a credible solution it could sent markets sharply lower.
United States Steel Corp. dropped 9.6 percent after the nation's largest steelmaker warned that demand for some of its products could decline in the final three months of the year if the economy slows down more.
Delta Air Lines Inc. slumped 5.2 percent after the airline reported results that missed Wall Street's expectations. Delta cut its flights 1 percent in the most recent quarter and said it would cut as much as another 5 percent during the last three months of this year.
Five stocks fell for every one that rose on the New York Stock Exchange. Volume was average at 4.3 billion shares.