March 31, 2023

Wall Street Flat

Extending Wednesday’s 6.4 percent decline, Apple was trading down 0.7 percent at $535 early on Thursday, after falling as much as 3.7 percent at the open, which brought the market capitalization of the world’s largest publicly traded company down to below $500 billion briefly. In September, it was capitalized at a record $663 billion.

Broadcom shares led the advance in chip makers with a 2.1 percent gain, one day after it forecast for fourth-quarter revenue at the high end of its target range, citing slightly better-than-expected sales in its mobile business.

The PHLX semiconductor index rose 0.4 percent.

Budget discussions continued to be a key focus for investors. President Barack Obama said there could be a quick deal to avert the “fiscal cliff” – tax hikes and spending cuts set to begin next year, possibly driving the U.S. economy back into recession – if Republican leaders agree to raise tax rates for those making more than $250,000 a year.

While Republican leaders in the House of Representatives insist that raising tax rates on the rich is a no-go, some GOP lawmakers now see it as inevitable to avoid the fiscal cliff.

“There are no real triggers here. It is just positioning going on for year-end, and this big decision” on the fiscal cliff, said Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.

He said Apple’s weakness was taking a toll on the market and expects equities to continue trading choppily through the day.

The Dow Jones industrial average fell 17.89 points, or 0.14 percent, to 13,016.60. The SP 500 dropped 1.78 points, or 0.13 percent, to 1,407.50. The Nasdaq Composite Index gained 2.89 points, or 0.10 percent, to 2,976.59.

Apple Inc’s rank in China’s smartphone market fell to No.6 in the third quarter as it faces tougher competition from Chinese brands, research firm IDC said Thursday. Apple’s 6.4 percent drop on Wednesday was its worst daily performance since December 2008 and dragged down the Nasdaq Composite.

Shares of Apple were down 0.7 percent at $535, after earlier falling more than 3 percent.

Sirius XM Radio shares rose 2.2 percent to $2.83 after its board approved a $2 billion stock repurchase and issued a special dividend, giving a big payout to its largest shareholder, Liberty Media.

Without action from Congress in coming weeks, tax cuts on capital gains and dividends will expire at the end of 2012.

Garmin shares rose 5 percent to $41.71 after Standard Poor’s said it would add the navigation device maker to its SP 500 index. Garmin will replace R.R. Donnelley Sons after the close of trading on December 11.

Several European equity benchmark indexes hit 2012 highs, boosted by hopes a U.S. budget deal will be reached before the year-end, and that the worst of Europe’s debt crisis might be over.

(Additional reporting by Herbert Lash; Editing by Bernadette Baum)

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DealBook: $440 Million Loss in Glitch Imperils Trading Firm

4:01 p.m. | Updated

$10 million a minute.

That’s about how much the trading problem that set off turmoil on the stock market on Wednesday morning is already costing the trading firm.

The Knight Capital Group announced on Thursday that it lost $440 million when it sold all the stocks it accidentally bought Wednesday morning because a computer glitch.

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The losses are threatening the stability of the firm, which is based in Jersey City. In its statement, Knight Capital said its capital base, the money it uses to conduct its business, had been “severely impacted” by the event and that it was “actively pursuing its strategic and financing alternatives.”

The losses are greater than the company’s revenue in the second quarter of this year, when it brought in $289 million.

“With the events of yesterday, you have to question if this is the beginning of the end for Knight,” said Christopher Nagy, founder of the consulting firm KOR Trading.

Timeline: Trading Errors

Shares of Knight Capital closed down 63 percent, at $2.58, on Thursday. On Wednesday, the shares fell 32 percent.

The problem on Wednesday led the firm’s computers to rapidly buy and sell millions of shares in over a hundred stocks for about 45 minutes after the markets opened. Those trades pushed the value of many stocks up, and the company’s losses appear to have occurred when it had to sell the overvalued shares back into the market at a lower price.

The company said the problems happened because of new trading software that had been installed. The event was the latest to draw attention to the potentially destabilizing effect of the computerized trading that has increasingly dominated the nation’s stock markets.

Until this week, Knight had been one of the biggest beneficiaries of the evolution of the market, helping clients trade in and out of stocks at high speeds. The firm was responsible for 11 percent of all trading in American stocks between January and May, according to Adam Sussman at the data company Tabb Group

On Thursday, Knight said that none of its customers had been hurt by the errant trades.

Still, the trading glitch is especially uncomfortable for Knight’s chief executive, Thomas Joyce. Mr. Joyce, 57, has been at the helm of the company since 2002. Now that his firm is in the spotlight, it’s embarrassing for Mr. Joyce because he was a vocal critic of the hiccups that upended the Facebook public offering in the middle of May. At the time, Knight suffered $35.4 million in losses because the trades the company was making in Facebook shares weren’t registered by Nasdaq for hours.

Knight was founded in 1995 and went public in 1998 after quickly becoming one of the largest middle men, or market makers in the stock market. Knight founded DirectEdge, a company that is now the fourth-largest stock exchange operator in the United States. Knight sold stakes in DirectEdge to other Wall Street firms and now owns only a minority stake in the company.

Knight has become known for executing trades on behalf of retail brokers like TD Ameritrade and ETrade. It is the major player in the business along with UBS, Citibank and the Chicago firm Citadel.

Mr. Nagy of KOR Trading, who used to work for TD Ameritrade, said that large retail brokers were likely to find alternatives if Knight were unable to continue taking in new business. But he added that Knight had “unmatched” connections with smaller banks and brokers, and those smaller firms may have trouble immediately finding a replacement for Knight.

Knight had recently been increasing its business and reported having 1,418 employees as of the end of the first quarter of this year in 21 locations around the world.

This post has been revised to reflect the following correction:

Correction: August 2, 2012

An earlier Homepage headline about the Knight Capital Group developments referred incorrectly to the company as a hedge fund. It is, as the article correctly notes, a trading firm.

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