Pessimism Mounts, Stocks Close Lower

Includes: BAC, DIA, DXCM, HPQ, QQQ, S, SPY
by: Midnight Trader

4:14 PM, Aug 19, 2011 --

  • DJIA down 173.93 (-1.57%) to 10,817.65
  • S&P 500 down 17.12 (-1.50%) to 1,123.53
  • Nasdaq down 38.59 (-1.62%) to 2,341.84


  • Nikkei down 2.5%.
  • Hang Seng down 3%.
  • FTSE-100 down 1.0%.


(-) HPQ continues Thursday slide that followed guidance warning, reshuffling; downgraded today.

(-) LDK continues evening slide after lowering outlook.

(-) SCG says sale rumors are false.

(-) BAC cutting jobs.

(-) CRM continues evening gain after revenue beat, in-line guidance.


(+) DELL gets mixed analyst coverage.

(+) MRVL continues evening gain that followed earnings beat.

(+) CLWR jumps on buyout speculation.


Friday was another grim day for Wall Street as the major averages ended firmly in the red on the heels of a huge sell-off on Thursday. Traders were skittish and intent on selling as worries mounted over the potential for the U.S. to fall back into a recession. Those worries, combined with a weak outlook from Hewlett-Packard (NYSE:HPQ) and JPMorgan's move to cut its Q4 economic growth forecast for the U.S., were enough to stoke a hefty level of pessimism across trading desks.

Economists at JPMorgan Chase on Friday further cut estimates for U.S. economic growth and warned that recession risks are "clearly elevated." The bank cut its Q4 view to 1% growth from a previous projection of 2.5%. The firm also lowered its Q1 2012 growth forecast to 0.5% from 1.5%.

Deutsche Bank on Friday downgraded its forecast for China, saying the slowdown, and even potential for recession, in Europe and the United States, now outweighed domestic credit tightening as the biggest risk to China's economy.

Looking forward to next week, earnings season thins out considerably, with only a few names due to report. On Monday, Suntech Power (NYSE:STP) posts financials, followed by H.J. Heinz (HNZ), Medtronic (NYSE:MDT) and Pacific Sunwear (NASDAQ:PSUN) on Tuesday. American Eagle Outfitters (NYSE:AEO), Applied Materials (NASDAQ:AMAT) and Guess? Inc. (NYSE:GES) issue results on Wednesday. Aruba Networks (NASDAQ:ARUN), Krispy Kreme (KKD) and Pandora (NYSE:P) are set to release quarterly results on Thursday, with Tiffany (NYSE:TIF) closing out the week on Friday.

On the economic front, new home sales data are due on Tuesday, followed by durable orders, FHFA housing price index, and crude inventories on Wednesday. On Thursday, traders will see initial claims data, followed by GDP and Michigan Sentiment on Friday.

In company news Friday:

Shares of Hewlett-Packard (HPQ) tanked after the company issued a weak outlook, announced a major multi-billion dollar acquisition, and detailed a transformation that moves it to a model that looks more like IBM (NYSE:IBM) than that of a consumer technology company. HP is looking at a possible exit from the personal computer business.

Needham analyst Richard Kugele noted that, with the move," HP may have eroded what remained of Wall Street's confidence in the company and its strategy," Forbes quoted the analyst as saying.

Clearwire (CLWR) surged after a report by Bloomberg said that Sprint Nextel (NYSE:S) is talking with cable companies including Cablevision (NYSE:CVC) and Comcast (NASDAQ:CMCSA) about a possible investment that may lead to an acquisition of the company.

Shares of DexCom (NASDAQ:DXCM) were higher as the company is seen engaging in takeover talks starting next year if it can achieve a profit, Bloomberg reports. The company is hoping a newly introduced version of its Seven Plus sensor, which it plans to introduce next year, will help to boost its stock price to $20 or above.

Bank of America (NYSE:BAC) shares were down on wire reports the bank will cut 3,500 jobs by the end of next month and join an expanding list of banks repositioning themselves amid the slow economic recovery. The job cuts, which were reportedly disclosed in a memo and will be supplemented by cost-cutting measures, the report said.

Commodities finished trading mixed as crude oil futures slipped into negative territory after trading higher for much of the day. Gold ended with gains to finish the week, at another record high.

Light, sweet crude oil for September delivery finished down 0.2% to $82.26 a barrel. In other energy futures, heating oil was up 1.22% to $2.90 a gallon while natural gas was up 1.23% to $3.94 per million British thermal units.

Meanwhile, gold futures hit another record closing price as the dollar weakened against foreign currencies.

Gold for December delivery finished up 1.7%to $1,852.20 an ounce. In other metal futures, silver was up 4.42% to $42.51 a troy ounce while copper traded up 0.28% to $3.99.