US markets fall

Mixed earning reports take toll on the market sentiments

US Market ended Tuesday, 21 20 October, 2008 with substantial losses. Earning reports dominated market sentiments since the very morning. Quite a few Dow components reported earnings today morning which were very mixed in nature. Market started the day in the red and continued its journey in the red throughout the day. The weakness in market was broadcasted. The energy sector was a main laggard with crude prices once again slipping back to $70/barrel. Technology sector was another setback as Texas Instruments plunged considerably.

During the afternoon session, indices had pared half of their losses with help from the financial sector. American Express was trying to give some solid direction. But in the last hour, indices plunged once again.

The Dow Jones Industrial Average ended the day down by 231 points, to 9,033. The Nasdaq Composite Index, finished lower by 73 points at 1,696. S&P 500 finished lower by 30 points at 955.

Twenty six out of thirty Dow stocks was trading in the red led by Exxon Mobil, Chevron, Citigroup, Caterpillar and Du Pont.

Among the batch of today’s earning reports, some notable names that topped third quarter earnings estimates included 3M, American Express, DuPont and Pfizer. American Express reported a smaller-than-forecast 24% profit fall for the third quarter late on Monday.

But there were a few that missed expectations too. Caterpillar reported a third-quarter profit decline of 6% from the year-ago period, but held firm to its full year profit estimate. Chemical giant DuPont slipped 6.2% after cutting its earnings outlook.

Technology sector was considerably weak today following gloomy outlook from Texas Instrument and earnings miss from Sun Microsystems. Texas Instruments posted a larger-than-expected 17% decline in earnings per share and lowered its fourth quarter earnings outlook, citing weak orders. On the other hand, Sun Microsystems forecast a larger than expected loss for the year.

In the latest effort to solve the credit crisis in recent times, the Fed announced that it will buy commercial paper (short-term corporate debt that many businesses rely on) from money market mutual funds. The Fed said it created the facility because money market mutual funds and other investors have had difficulty selling assets to satisfy redemption requests and meet portfolio rebalancing needs. The Fed had already announced plans to buy commercial paper directly from companies.

Volume on the New York Stock Exchange exceeded 1.1 billion, and decliners topped advancers more than 2 to 1. On the Nasdaq, almost 899 million shares traded, and one stock traded higher for every three on the decline.

Crude prices fell today and closed at the $70 level once again. Prices fell as Organization of Petroleum Exporting Countries (OPEC) mulled over a production cut at its 24 October, meeting at Vienna for the current low crude prices. The strong dollar was the main reason for the falling crude price. Crude-oil futures for light sweet crude for November delivery closed at $70.89/barrel (lower by $3.36 or 4.5%) on the New York Mercantile Exchange. The more-active December contract fell $2.21 (3%) to settle at $72.18 a barrel.

In the currency market on Tuesday, the dollar rose to the highest level in 20 months against the euro, as investors focused on the U.S. financial rescue package and further stimulus hoped to provide a needed boost to the economy. The dollar index, the weighted basket of six major currencies, climbed to the highest since March 2007. The dollar rose to a 19-month high against the euro on bets that the European Central Bank will cut borrowing costs at a faster pace than the Federal Reserve.

Earning reports will dominate the sentiment tomorrow as a number of Dow components are expected to come out with their earning results. AT&T, Boeing, Mc Donalds and Merck are the major ones among them. Among economic reports for the day, the weekly inventory report by the energy department is expected to be the major one.