By Jonathan Cheng
U.S. stocks tumbled in the final hour of trading, capping a
volatile day of trading dominated by a surge in oil prices and a
series of headlines on the European debt crisis.
The Dow Jones Industrial Average finished a rocky session down
190.57 points, or 1.58%, at 11905.59, for its second decline in
three days. The Standard & Poor's 500-stock index finished down
20.89 points, or 1.66%, at 1236.92, while the Nasdaq Composite lost
46.59 points, or 1.73%, to 2639.61.
Weighing most heavily on stocks were financial companies, which
were weak all day but plunged after a ratings-agency report on U.S.
banks' exposure to a worsening European debt crisis. Morgan Stanley
dropped $1.27 a share, or 8%, to $14.66 a share and Goldman Sachs
Group lost 4.15, or 4.2%, to 95.60 while J.P. Morgan Chase and Bank
of America each declined by 3.8%.
The session saw the blue-chip Dow fall by 139 points shortly
after the open, as investors fretted about rising sovereign debt
yields in Europe and crude-oil prices that topped $100 a barrel for
the first time since June. By the mid-afternoon, investors had
clawed back all of those declines on hopes of more aggressive
central bank intervention to prop up global debt markets. But in
the final hour of trading, investors were rattled by the Fitch
report, and signs of gridlock on the U.S.'s efforts to slash its
deficit.
The late-hour decline was also attributed by some traders as
tied to a comment by Texas Republican House member Jeb Hensarling,
who was quoted saying that talks on the congressional joint
supercommittee to reduce the deficit had stalled ahead of its Nov.
23 deadline.
"It's a combination of the Fitch commentary and the stall in the
supercommittee," said Michael Marrale, head of U.S. sales trading
at RBC Capital Markets. "I was under the impression that there's a
sense of urgency to make something happen after the credit
downgrade over the summer, but a lot of this is going to be
politics as usual, and it looks like it'll take some time to work
itself out. I don't think it should be a real surprise, but it just
shows how fragile the markets are."
Mr. Marrale added: "I don't expect any respite from this
volatility in the near future."
A source of relative strength were energy stocks, after U.S.
crude-oil futures prices surged to a five-month high of $102.59 a
barrel on news that refiners in the key U.S. Gulf Coast region will
be getting better access to benchmark West Texas Intermediate
crude. Better access means demand is likely to increase.
In Europe, the Stoxx Europe 600 erased strong early gains to
finish flat. Early optimism faded after Bank of England Governor
Mervyn King said the U.K.'s economy could be flat until the middle
of next year, while U.K. unemployment rose to 8.3% in October, the
highest since 1996.
At the same time, the European Central Bank bought Italian,
Spanish and Portuguese government bonds, bringing yields down and
lending support to European shares. Even so, the yield on the
Italian 10-year government bond remained stubbornly high, trading
above 7%--a level near which other European countries have had to
seek bailouts--before finishing at 6.992%. France's bond yield fell
to 3.698%, from 3.75% earlier in the day. Spain's bond yield,
however, rose to 6.378% after falling to low as 6.25% following the
ECB buying earlier in the day.
With Italian government yields breaching the 7% level that many
investors consider dangerous, investors took hope in suggestions
that the European Central Bank and the Fed will coordinate their
actions to support asset prices. Those hopes powered some of
Wednesday's early-afternoon rally.
Asian markets were also broadly lower on euro-zone worries.
China's Shanghai Composite shed 2.5%, and Japan's Nikkei Stock
Average was down 0.9%.
Gold futures slipped to $1,773.80 per troy ounce, while the
dollar gained on the euro and slipped against the yen. U.S.
Treasurys rose, pushing the yield on the benchmark 10-year Treasury
note down to 2.023%.
In U.S. economic news, consumer prices fell 0.1% in October,
while so-called core inflation, which excludes energy and food
costs, rose by 0.1%. Economists had forecast no change in the
headline number, and a 0.1% gain in the core figure.
Industrial production climbed 0.7% in October, exceeding
expectations, though September's figure was revised downward.
Capacity utilization rose to 77.8%, from 77.3% in September,
according to the Federal Reserve. Meanwhile, the National
Association of Home Builders reported its strongest reading on the
housing market since May 2010.
In corporate news, shares of Dell fell 50 cents, or 3.2%, to
15.13 after the computer maker beat third-quarter earnings
estimates but missed on revenue. It also warned that full-year
revenue was likely to come in at the lower end of a previously
forecast range.
Abercrombie & Fitch slumped 7.60, or 14%, to 48.10 to lead
the S&P 500 decliners. The apparel retailer's quarterly
earnings fell short of expectations because of higher average unit
costs and greater uncertainty about the macroeconomic
environment.
Tyco International gained 1.20, or 2.6%, to 46.99 after the
diversified industrial company reported better-than-anticipated
fiscal fourth-quarter earnings and revenue.
Agilent Technologies gained 33 cents, or 0.9%, to 38.58 after
revenue and margins improved, though fourth-quarter profit slipped
1% as charges weighed on the maker of testing and measurement
equipment.
Autodesk rose 1.54, or 4.5%, to 35.58 after third-quarter
profits beat expectations. Cost controls helped boost margins amid
strong revenue growth in all of its main markets.
Research in Motion gained eight cents, or 0.4%, to 19.21 after
Goldman Sachs raised its recommendation on the stock to "hold,"
from "sell," citing the stock's low valuation.