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Dow falls 128, with Chevron and Alcoa leading way
NEW YORK — Downbeat reports from Alcoa and Chevron at the start of corporate earnings season pulled stock indexes lower for a third straight day Wednesday. The Dow Jones industrial average slumped 128 points, its steepest loss since late June.
The company is often used as a weather vane for the global economy. “And judging by Alcoa’s massive inventory of aluminum, it seems pretty anemic,” said Jack Ablin, chief investment officer at Harris Private Bank.
Chevron, the country’s second-largest oil company, warned late Tuesday that slumping oil prices and production would cause earnings to be “substantially lower.” It blamed Hurricane Isaac for disrupting production at a Mississippi refinery.
The Dow fell 128.56 points to close at 13,344.97, just shy of 1 percent, its fourth straight drop and the largest point decline since June 25. Chevron alone pulled the Dow down 38 points.
The Standard & Poor’s 500 index fell 8.92 points to 1,432.56.
Alcoa and Chevron’s results were an unpromising start to the third-quarter earnings parade, said JJ Kinahan, chief derivatives strategist at Ameritrade. “It’s beginning to look like we might have a lot of gloom-and-doom earnings calls this quarter,” he said.
Of the 10 industry groups within the S&P 500, all but financials fell. Energy and materials stocks, whose fortunes hinge on economic growth, slumped the most. Bank stocks ended the day flat.
In other trading, the Nasdaq lost 13.24 points to 3,051.78. The yield on the benchmark 10-year Treasury slipped to 1.68 percent, down from 1.71 percent late Tuesday.
In one of the few economic reports out Wednesday, the Federal Reserve said the U.S. economy “expanded modestly” from mid-August through September. The survey, known as the Beige Book, pointed to improvements in housing car sales, manufacturing and the housing market. Employment and consumer spending, however, remained mostly flat.
Wal-Mart Stores surged $1.28 to $75.42, and earlier touched an all-time high of $76.81. The president of its U.S. division told Wall Street analysts that the retail giant plans to open more small-scale stores, including its Express chain, to compete with discount retailers and drugstore chains.
Alcoa’s earnings report marks the unofficial start to the quarterly earnings season, expected to be the worst in three years. Analysts project that companies in the S&P 500 will say third-quarter earnings shrank 1 percent compared with the same quarter of last year.
Ablin said investors need solid reasons to buy stocks now, given the stock market’s strong run this year. “My sense is that, with these downbeat earnings announcements, there’s not much around right now,” he said.
Concerns over the global economy helped knock the Dow down 110 points on Tuesday. The International Monetary Fund trimmed its forecast for worldwide growth, saying that trouble in Europe and other developed regions has spread to faster-growing developing countries. The day before, the World Bank cut its estimate for growth in China, the world’s second-largest economy behind the U.S., and countries across Asia.
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