Market Commentary and Intraday News

Stocks Plummet After Bullard Warns Of Deflation - U.S. Commentary

41 days ago

(RTTNews) - Stocks have given up the remainder of some early gains and are sharply lower in early afternoon trading on Thursday, with the markets reacting to comments from St. Louis Federal Reserve Bank President James Bullard.

The markets slid lower as Bullard stated that the Fed should have its finger on bringing back debt purchase programs in the event of any signs of deflation, as credit conditions still remain relatively tight.

Earlier upside came as the markets focused on a decline in jobless claims and the silver lining in a mixed bag of earnings reports.

On the economic front, the Labor Department released a report showing a modest decrease in initial jobless claims in the week ended July 24th.

Jobless claims dropped to 457,000 from the previous week's revised figure of 468,000. Economists had been expecting jobless claims to edge down to 460,000 from the 464,000 originally reported for the previous week.

Despite the decrease, jobless claims remain well above the 400,000 level and well off the two-year low of 427,000 that was set in earlier in the month.

Peter Boockvar, equity strategist at Miller Tabak, said, "GM not shutting auto plants as is typical this time of the year is still a distortion but it is surprising that claims aren't lower because of it and thus current levels still remain a concern at this stage of an economic recovery."

In earnings news, Exxon Mobil Corp. (XOM) and Colgate-Palmolive Co. (CL) both beat second quarter earnings estimates but fell short of revenue expectations. Meanwhile, Motorola Inc. (MOT) reported adjusted second-quarter earnings and sales that were ahead of estimates.

After the markets closed for trading in the previous session, Japanese electronics giant Sony Corp. (SNE) reported a profit for the first quarter of fiscal 2011 compared to a loss in the same period last year. The company also raised its full year earnings guidance.

The major averages have moved off their worst levels of the day in recent trading but remain firmly negative. The Dow is down 74.81 points or 0.7 percent at 10,423.07, the Nasdaq is down 30.14 points or 1.3 percent at 2,234.42 and the S&P 500 is down 10.52 points or 1 percent at 1,095.61.

Sector News

Semiconductor, networking, electronic storage and internet stocks are posting steep losses in early afternoon trading, reflecting notable weakness in the tech sector. The Philadelphia Semiconductor Index is down by 2.6 percent and is on pace for a two-week closing low.

Within the semiconductor sector, shares of Advanced Micro Devices (AMD) are currently down by 3.5 percent, backing further off of the one-month closing high it set on Tuesday.

The loss by AMD comes after FBR Capital Markets lowered its rating on the stock from Outperform to Market Perform, citing economic concerns along with a holdup in the introduction of fresh technology.

Commercial real estate, biotechnology, housing and trucking stocks are also markedly lower, while some brokerage stocks are holding onto gains.

Stocks In The News

Despite a down day by a majority of stocks, Logitech (LOGI) is higher after reporting a first quarter profit and revenues that topped estimates while also raising its sales guidance for 2011. The stock has gained 3.5 percent, setting its best intraday price in just under three months.

Lincoln National (LNC) is also on the upside after revealing second quarter earnings and revenues that beat forecasts. The stock has gained 4.6 percent, climbing to a one-month intraday high.

Meanwhile, credit card service provider Visa Inc. (V) is trading lower as Wall Street analysts projected that new processing fee laws could stymie future profit lines. The stock is down by 4.5 percent but remains rangebound.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region saw a mixed close on Thursday. Japan's benchmark Nikkei 225 inched fell by 0.6 percent, Hong Kong's Hang Seng Index was nearly flat and India's BSE 30 Index gained 0.2 percent.

Meanwhile, the major European markets all ended the day in the red after seeing a late-day sell off. The U.K.'s FTSE 100 Index slid by 0.1 percent, while the French CAC 40 Index and the German DAX Index fell by 0.5 percent and 0.7 percent, respectively.

In the bond markets, treasuries have turned modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.978 percent, posting a loss of 2.3 basis points.

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