The sovereign debt problems in European nations that share the euro have loomed over the markets for more than a year, with investors able to price in some of the twists and turns in the efforts to resolve them. But on Tuesday, stocks that had opened lower dipped further on concern about what the cancellation of the meeting might portend.
Financial stocks in particular declined steeply, more than 3 percent. Europe’s leaders said they had made some progress over the weekend on measures aimed at addressing their financial and economic problems, but a big issue that analysts had expected to be tackled on Wednesday was how to expand the stability fund of 440 billion euros, or $611 billion, so that it would cover Spain and Italy, if necessary.
“Investors have been overly optimistic on the progress made by European leaders and yes, I think there is good news from Europe, but there seems to be the presumption that because they are meeting everything would work out smoothly,” said Kate Warne, investment strategist for Edward Jones. “It is never quite as much or as fast as anyone would like.”
The Dow Jones industrial index closed down by 207 points, or 1.74 percent, at 11,706.62, and the Nasdaq composite index slid 2.3 percent, to 2,638.42. The Standard Poor’s 500-stock index, which measures the broader market, fell by 2 percent, to 1,229.05.
The Euro Stoxx index closed down 1.06 percent, and markets in Paris and Germany were also lower.
The new lows on Tuesday derailed some of the gains made in recent days that had sent the Dow and the Nasdaq higher for the year. The Nasdaq returned to the red for the year, and the S. P. was down more than 2 percent in the year to date.
Materials, industrials, energy and consumer discretionary sectors each fell by 2 percent or more. The consumer index was pulled down by a sharp drop in Netflix shares, which were down more than 34 percent at $77.37. Netflix had reported that it expected lower revenue and profits in the fourth quarter because of recent changes in pricing.
Anthony Valeri, an investment strategist for LPL Financial, said that the markets had started the day slightly lower because of some earnings reports.
United Parcel Service, for example, said earnings per share rose 14 percent in the third quarter, compared with the same period in 2010. But it said total domestic volume growth was flat “as a result of the slow U.S. economy.”
On Monday, Caterpillar helped to lift trading with strong results, but on Tuesday, 3M, another bellwether company, missed earnings forecasts and lowered its guidance.
3M stock was down by 6.25 percent, at $77.04, and U.P.S. was down by about 2 percent at $69.35. “We all know that Europe is on the verge of a mild recession but hearing that from a company that typically manages through these situations quite well means it may be more significant,” Ms. Warne said, referring to 3M. “It suggests it may also be a problem for other companies.”
DuPont, the chemical manufacturer, posted quarterly results that exceeded forecasts, with net income up 23 percent, or 48 cents per share. The company said that it was raising its expectations for full-year earnings, but also that it expected slower global growth in the fourth quarter of the year. Its shares were lower by about 2.5 percent, at $44.94.
Analysts said outlooks were mixed and economic data relatively weaker, pointing to slow growth. “That was another dampener, if you will, on sentiment,” said Wasif Latif, vice president for equity investments at the USAA Investment Management Company.
But, he added that the market’s main driver was Europe. “So today is: let’s take some money off the table,” he said.
Gold was up more than 2 percent at just over $1,700 an ounce. Safer assets became more attractive ahead of the summit meeting on Wednesday, said Eric Viloria, a senior currency strategist at Forex.com.
In economic news, home prices showed a modest rise in 10 of 20 cities surveyed in the Standard Poor’s/Case-Shiller index. But consumer confidence fell, as reflected in a decline in the Conference Board’s index to 39.8 points in October after a reading of 46.4 in September.
Financial market turmoil has weighed heavily on consumer confidence, along with the ailing jobs market, Joshua Shapiro, the chief United States economist for MFR, wrote in a research note.
The United States 10-year Treasury bond rose to 100 3/32, from 99 2/32 on Monday. The yield was 2.11 percent.
Article source: http://feeds.nytimes.com/click.phdo?i=f1122dbe95ef3c4762bbe338619513ab
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