Stocks indexes slide following gloomy IMF forecast
Oct 9, 2012 at 3:00 AM
NEW YORK (AP) — Stocks are sliding on Wall Street Tuesday following another weak forecast of global economic growth and poor expectations for U.S. corporate earnings.The Dow Jones industrial average was off 77 points at 13,506 as of 1 p.m. Eastern (1700 GMT). The Standard & Poor's 500 index lost 10 points to 1,445. The Nasdaq composite gave up 39 points to 3,073.The slide comes on the five-year anniversary of record high closes for the Dow and S&P 500. The Dow is now 5 percent below its peak, the S&P 500 is down 8 percent.Investors were discouraged by an International Monetary Fund report released overnight which said that the global economy is weakening and the downturn afflicting developing nations has begun to spread. The weak forecast comes one day after the World Bank cut its estimate for growth in China, the world's second-largest economy, and for developing countries across Asia.The IMF forecasts that the world economy will expand 3.3 percent this year, down from the estimate of 3.5 percent growth it issued in July. Its forecast for growth in 2013 is 3.6 percent, down from 3.9 percent three months ago and 4.1 percent in April.Talley Leger, investment strategist at Macro Vision Research, noted the IMF report comes while new Greek protests erupt in Athens over austerity measures and after Moody's downgrade of Cyprus's credit rating on Monday."It's all negative headlines today," Leger said. "There's a lot of European fears."Leger added he wouldn't be selling stocks given that Federal Reserve and other central banks are trying to stimulate economies around the world. "With markets so firmly supported by central bankers, I don't want to be defensive," he said. "It's a gift" to investors.After the closing bell, aluminum maker Alcoa becomes the first major U.S. company to report third-quarter results. Analysts are expecting earnings at S&P 500 companies to decline overall for the first time in nearly three years.Wall Street expects Alcoa to break even, but had been predicting profits of 12 cents per share from the aluminum maker as recently as July. Alcoa was up 2 cents at $9.14 in afternoon trading.Two big banks, JPMorgan Chase and Wells Fargo, post earnings Friday.Earlier Tuesday, the National Federation of Independent Business reported that business owners became increasingly pessimistic during September due to the weak hiring environment and poor sales. Nonetheless, the number of owners who expect business conditions to improve in six months gained 4 percentage points. Those believing it's a good time to expand rose 3 percentage points.Among other stocks making big moves, Edwards Lifesciences dropped $19.51 to $87.90 after the company reported revenue that fell well short of analyst's forecasts. Sales of its Sapien heart valves were weaker than the company had expected.Yum Brands, which owns the Taco Bell, Pizza Hut and KFC chains, fell 42 cents to $66.52. The company, which also reports results after the closing bell, has predicted a return to rapid growth in its China operations in the second half of the year.Stanley Black & Decker fell $1.11 to $73.12 after the tool maker said it would sell its hardware and home-improvement business to Spectrum Brands Holdings for $1.4 billion in cash. Spectrum Brands' stock jumped $4.26 to $45.42. The Wisconsin-based company owns the Rayovac, Remington and Toastmaster brands.The yield on the 10-year Treasury note fell to 1.71 percent from 1.74 percent late Friday. U.S. government bond trading was closed Monday for the Columbus Day holiday.European markets also fell. Benchmark indexes fell 0.8 percent in Germany and 0.5 percent Britain. France's stock market index fell 0.7 percent.Copyright 2012 The Associated Press.