US stocks fall for a second day; Nasdaq slumps
NEW YORK, USA
INVESTORS unloaded stocks for a second straight day ahead of a slew of corporate earnings that will help them determine whether a recent run-up in the market is justified.
The selling yesterday follows record closes last week. The Dow Jones industrial average ended below 17,000, a level it topped Thursday for the first time in its 118-year history.
Internet companies bore the brunt of the declines. Among the biggest losers were Twitter and Pandora Media, a music streaming service, down seven per cent each. Facebook and Netflix each dropped more than three per cent. The Nasdaq composite fell 1.4 per cent, its biggest slide in two months.
Investors also dumped small-company stocks, which tend to be riskier investments. The Russell 2000 fell 1.2 per cent.
The winners of the day were utilities, considered a safe choice in uncertain times and attractive because of their steady dividends. That sector rose 0.6 per cent, the only one of the 10 in the Standard and Poor’s 500 index that finished higher.
The selling this week is not surprising given the S&P 500’s near tripling in price since its March 2009 low, said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research. He also noted that the bull market has lasted more than five years, the fourth longest since World War II.
“The longer it gets out of line with historical patterns,” he said, “the closer we get to fizzling out.”
As companies begin reporting second-quarter results this week, investors will be looking for signs that the strengthening US economy has translated into a surge in profits. Expectations are for a 6.6 per cent gain over the year earlier, double the increase in the first quarter, according to S&P Capital IQ, a research firm.
Yesterday, the Dow index fell 117.59 points, or 0.7 per cent, to close at 16,906.62. The Nasdaq fell 60.07 points to 4,391.46. The S&P 500 lost 13.94 points, or 0.7 per cent, to 1,963.71.
Among S&P 500 sectors, telecommunications companies fell the most, 1.5 per cent.
Steven Ricchiuto, senior economist at Mizuho Securities, thinks signs that the global economy is slowing have added to investor jitters. Yesterday, Germany reported that exports fell more than expected in May and the United Kingdom said manufacturing output dropped 1.3 per cent that month.
“The global economy is taking a hit today,” Ricchiuto said. “Global growth is decelerating. It may actually be stalling.”
Germany’s DAX stock index fell 1.3 per cent yesterday and Britain’s FTSE 100 dropped 1.2 per cent.
The US earnings reporting season got started after the closing bell yesterday when aluminium maker Alcoa reported results that were better than investors expected. Wells Fargo, the number one home mortgage lender in the US, reports on Friday.