Wall Street down on France cut
International / 20 Nov '12, 5:38pm
US stocks fell on Tuesday as a credit downgrade of France by ratings agency Moody's and a huge accounting charge by Hewlett-Packard gave investors reasons to pull money off the table after a two-day rally.
Hewlett-Packard Co tumbled 11.8 percent to $11.73 as the computer and printer maker swung to a fourth-quarter loss. The company said it took an $8.8 billion charge related to its acquisition of software firm Autonomy, citing “serious accounting improprieties.”
File imag. Credit: THE PHOTO HOLIC
H-P was the biggest drag on both the Dow and S&P 500, and the NYSEArca computer hardware index lost 2 percent.
Stocks were on track to end a two-day rally in which the benchmark S&P index had risen more than 2 percent, its best two-day run in nearly four months. Optimism that Washington politicians could agree on a deal to stave off the US “fiscal cliff” drove the market higher.
Moody's Investors Service cut France's sovereign rating by one notch to Aa1 after the market's close on Monday, citing an uncertain fiscal outlook as a result of the weakening economy.
While the move was expected after Standard & Poor's issued a similar downgrade in January, the Moody's decision was a reminder of the headwinds buffeting the global economy and the danger of contagion by the euro zone's debt crisis.
President Barack Obama and congressional leaders hope to start serious negotiations after the Thanksgiving holiday on Thursday on avoiding the “fiscal cliff,” a series of tax hikes and spending cuts that threaten economic recovery.
“The market is going to go up and down based on rhetoric coming out of Washington,” said Steven Roge, portfolio manager at RW Roge & Co in Beverly, Massachusetts.
“Because the delta of outcomes is so gigantic - you could have us go off the fiscal cliff, Europe blow up or fiscal cliff gets passed, growth resumes, Europe grows its way out of the debt crisis - we are just waiting for direction and the fiscal cliff is that first piece of information.”
A bright spot for the economy came in data showing US housing starts rose to their highest rate in more than four years in October, suggesting the housing market recovery was gaining steam. The PHLX housing sector index advanced 1.4 percent, led by a 4 percent climb in PulteGroup Inc to $16.53.
Best Buy Co Inc dropped 9.4 percent to $12.46 after the world's largest consumer electronics chain reported a weaker-than-expected profit and its ninth same-store sales decline in 10 quarters.
The Dow Jones industrial average dropped 59.51 points, or 0.47 percent, to 12,736.45. The Standard & Poor's 500 Index dropped 5.61 points, or 0.40 percent, to 1,381.28. The Nasdaq Composite Index dropped 11.13 points, or 0.38 percent, to 2,904.94.
The S&P 500 index had fallen 5.3 percent between election day and the start of the rebound as angst over a possible budget deal drove investors to sell stocks and limit the impact tax of expected tax increases on capital gains and dividends.
Federal Reserve Chairman Ben Bernanke will speak before the Economic Club of New York and may offer clues about the Fed's intentions on more monetary stimulus. Market participants currently expect the Fed to step up asset purchases in 2013 after Operation Twist expires. His remarks are scheduled for 12:15 p.m (19:15 SA time).
H.J. Heinz Co lost 1.5 percent to $57.84 and Campbell Soup Co shed 0.8 percent to $36.25 after both companies reported quarterly earnings. - Reuters