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Big firms report dismal earnings for third quarter
Dow takes another dive
Stock markets around the world suffered through one of the worst days of trading in months Tuesday, as a number of U.S. companies reported weak earnings because of a slowdown in the global economy and as concerns mounted over Spain’s role in the European financial crisis.
The Dow Jones industrial average suffered its biggest drop since June for the second time in less than a week with the index falling 243.36 points, or 1.82 percent, to close at 13,102.53. Those losses followed Friday’s session, when the Dow tumbled 205 points to close at 13,343.51.
These are the worst two days of trading for the Dow since June 21, when it lost 249.53 points, though the market had gained about 1,000 points overall in the four months since then.
However, a series of poor corporate earnings reports from such major companies as DuPont, Xerox, 3M and United Technologies have stoked fears of a weakening global economy, something to which such worldwide firms would be sensitive.
Tim Courtney, chief investment officer at Exencial Wealth Advisors in Oklahoma City, didn’t think it was just soft results driving the market’s plunge Tuesday. Analysts already were expecting lower revenue, so the weak results aren’t a total surprise.
The financial results, Mr. Courtney said, are just a symptom of a bigger problem, a sputtering economy threatened by the shadow of the “fiscal cliff” — a combination of tax increases and government spending cuts scheduled to take effect Jan. 1 that could send the U.S. back into recession.
“They’re using [earnings] as an excuse, but it’s the broader issues that are driving it,” he said. “What’s going to happen with the election, what’s going to happen with the fiscal cliff? Europe is already in recession — are we going to go, too? That fear is driving a lot of the selling right now.”
Bad news from Spain also hurt the markets. Several regions in Spain received a credit downgrade, which further worried investors. Spain’s central bank also announced the country’s economy contracted in the third quarter by 0.4 percent, the fifth quarter in a row of negative growth.
Also Tuesday, the Nasdaq fell 26.50 points, or 0.88 percent, to close at 2,990.46, while the Standard & Poor’s 500 index declined 20.71 points, or 1.44 percent, to close at 1,413.11.
DuPont, a chemical company, closed at $45.25, down $4.51, or 9 percent, after its earnings report disappointed investors with a profit that was lower than expected and the decision to cut 1,500 jobs that led to concern about how the company is handling the economic slowdown.
The company badly missed analysts’ estimates on earnings. It was expected to announce a profit of 47 cents per share but instead announced a profit of 32 cents per share. Revenue fell 9 percent to $7.4 billion, from $8.1 billion a year ago.
DuPont’s poor performance accounted for at least a 33-point drop on the Dow.
“Clearly, U.S. companies are feeling the pain as a result of the global slowdown,” Bernard Baumohl, managing director and chief global economist at the Economic Outlook Group, told Reuters.
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About the Author
Tim Devaney is a national reporter who covers business and international trade for The Washington Times. Previously, he worked for the Detroit News, Grand Rapids Press, Portland Press Herald and Bangor Daily News. Tim can be reached at firstname.lastname@example.org.
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