Wall Street declines after France downgrade, HP charge
NEW YORK (Reuters) - U.S. stocks fell on Tuesday as a credit downgrade of France by ratings agency Moody's and a huge accounting charge by Hewlett-Packard gave investors reasons to pull money off the table after a two-day rally.
Hewlett-Packard Co (HPQ.N) tumbled 11.8 percent to $11.73 as the computer and printer maker swung to a fourth-quarter loss. The company said it took an $8.8 billion charge related to its acquisition of software firm Autonomy, citing "serious accounting improprieties.
HP was the biggest drag on both the Dow and S&P 500, and the NYSEArca computer hardware index .HWI lost 2 percent.
Stocks were on track to end a two-day rally in which the benchmark S&P index had risen more than 2 percent, its best two-day run in nearly four months. Optimism that Washington politicians could agree on a deal to stave off the U.S. "fiscal cliff" drove the market higher.
Moody's Investors Service cut France's sovereign rating by one notch to Aa1 after the market's close on Monday, citing an uncertain fiscal outlook as a result of the weakening economy.
While the move was expected after Standard & Poor's issued a similar downgrade in January, the Moody's decision was a reminder of the headwinds buffeting the global economy and the danger of contagion by the euro zone's debt crisis.
President Barack Obama and congressional leaders hope to start serious negotiations after the Thanksgiving holiday on Thursday on avoiding the "fiscal cliff," a series of tax hikes and spending cuts that threaten economic recovery.
"The market is going to go up and down based on rhetoric coming out of Washington," said Steven Roge, portfolio manager at RW Roge & Co in Beverly, Massachusetts.
"Because the delta of outcomes is so gigantic - you could have us go off the fiscal cliff, Europe blow up or fiscal cliff gets passed, growth resumes, Europe grows its way out of the debt crisis - we are just waiting for direction and the fiscal cliff is that first piece of information."
A bright spot for the economy came in data showing U.S. housing starts rose to their highest rate in more than four years in October, suggesting the housing market recovery was gaining steam. The PHLX housing sector index .HGX advanced 1.4 percent, led by a 4 percent climb in PulteGroup Inc (PHM.N) to $16.53.
Best Buy Co Inc (BBY.N) dropped 9.4 percent to $12.46 after the world's largest consumer electronics chain reported a weaker-than-expected profit and its ninth same-store sales decline in 10 quarters.
The Dow Jones industrial average dropped 59.51 points, or 0.47 percent, to 12,736.45. The Standard & Poor's 500 Index dropped 5.61 points, or 0.40 percent, to 1,381.28. The Nasdaq Composite Index dropped 11.13 points, or 0.38 percent, to 2,904.94.
The S&P 500 index had fallen 5.3 percent between election day and the start of the rebound as angst over a possible budget deal drove investors to sell stocks and limit the impact tax of expected tax increases on capital gains and dividends.
Federal Reserve Chairman Ben Bernanke will speak before the Economic Club of New York and may offer clues about the Fed's intentions on more monetary stimulus. Market participants currently expect the Fed to step up asset purchases in 2013 after Operation Twist expires. His remarks are scheduled for 12:15 p.m (1715 GMT).
H.J. Heinz Co HNZ.N lost 1.5 percent to $57.84 and Campbell Soup Co (CPB.N) shed 0.8 percent to $36.25 after both companies reported quarterly earnings.
(Reporting by Chuck Mikolajczak Editing by W Simon and Kenneth Barry)
- Tweet this
- Share this
- Digg this
- India passes halfway mark in election with BJP gaining strength
- Bajaj Auto says union at Chakan plant plans work stoppage
- Japan will conduct Pacific whale hunt in wake of court ruling
- S.Korea ferry captain rushed back to bridge as ship listed - crewman
- Drone risks damage at record depth in search for Malaysian plane
The Election Commission has lifted a ban on a top aide of Hindu nationalist opposition leader Narendra Modi that had threatened to hobble his efforts to win votes in the country's most populous state. Full Article | Full Coverage