US markets closed in red the following renewed fears of a recession in the Eurozone after an economic report stated that manufacturing activity had contracted across Europe and China. Separately, weak earnings figures from Dell and a lack of domestic economic reports further dampened investor sentiment.
The Dow Jones Industrial Average (:DJIA) declined 0.2% to settle at 12,938.67. The major decliner for the blue chip index was Wal-Mart Stores which fell 2.45% after the retailer reported uninspiring quarterly earnings results. However, the 30 stock index is up 6% for the year. The Standard & Poor 500 (S&P 500) declined 0.3% or 4.55 points and closed yesterday’s trading session at 1,357.66. Energy sector stocks gained the most while financials took a heavy beating during the day’s trade. The tech laden Nasdaq Composite Index closed at 2,933.17, losing15.40 points. Total volumes on the New York Stock Exchange were 729 million shares. On the NYSE, for every two stocks that rose three fell. Total composite volume was around 3.6 billion shares traded, lower than last year’s average of 4.3 billion.
Coming to earnings results, world’s number three PC maker Dell Inc.’s (NASDAQ:DELL) share prices fell 5.8% to close at $17.15 after the company’s fourth quarter earnings figures came in lower than the Street’s expectations. Separately, the company also projected first quarter revenue below the Street’s estimates. Net income stood at $764 million or $0.43 a share, registering a drop of 18% on a yearly basis. Chief financial officer of Dell, Mr. Brian T. Gladden said “Profit margins for the quarter were hurt by a combination of weakness in public spending in the United States, discounting of the leftover inventory of its previous generation phones and the lingering impact of the Thailand flood on its product mix”. Separately, analysts at Citigroup downgraded the shares of the company from buy to neutral rating.
On the domestic economic front, there were no major releases yesterday that could give a boost to the markets. The lone report was from the National Association of Realtors, which stated that existing home sales rose 4.3% for the month of January to a seasonally adjusted annual rate of 4.57 million from a downwardly revised 4.38 million-unit pace in December. Lawrence Yun, NAR chief economist, said strong gains in contract activity in recent months show buyers are responding to very favorable market conditions. “The uptrend in home sales is in line with all of the underlying fundamentals – pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents,” he said. However, another report showed that mortgage applications fell during the prior week, raising questions about the U.S. housing market's recovery. Major economic reports scheduled for release today include weekly Initial Claims and Crude Inventories. On Wednesday, the Obama administration said it proposes to cut the US corporate tax rate from 35% to 28% and also plans to eliminate various tax breaks.
Meanwhile, lackluster data from the Chinese Government showed that the country’s export orders had declined. The fall is said to be the worst in the past eight months. European stock markets fell after a survey showed that business activity in the Euro zone contracted during the month of February. Fresh recessionary fears in Europe were felt following data showing weakness in the manufacturing and services sectors. Jack DeGan, chief investment officer at Harbor Advisory Corp in Portsmouth said, "We had some modestly weak data from Europe and China, but today is mostly just another day of churning as we sit close to that key level of 1,360 on the S&P."
Coming to sectoral stocks, gains made by oil stocks nearly offset the losses felt by the banking sector. Share prices of Nabor Industries Ltd (NYSE:NBR) gained 7% to close at $21.78 after the company’s results topped the Street’s expectations. Shares of other oil and gas companies including Pioneer Drilling Co (AMEX:PDC), Patterson-UTI Energy, Inc (NASDAQ:PTEN), Parker Drilling Company (NYSE:PKD), Unit Corporation (NYSE:UNT) and Rowan Companies (NYSE:RDC) all increased by 2.3%, 1.9%, 2.3%, 1.7% and 1.8% to close at $9.59, $19.97, $7.13 and 38.37 respectively. Major banking stocks to shed their gains during the day were Bank of America (NYSE:BAC), Citigroup (NYSE:C), JP Morgan (NYSE:JPM), Goldman Sachs (NYSE:GS) and Canandaigua National Corporation (OTC:CNND), all of which decreased by 1.9%, 3%, 1%, 1.9% and 6.8% respectively.
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