By Donna Kardos Yesalavich
U.S. stocks declined Thursday as weak earnings and forecasts
from retailers weighed, along with final negotiations for the
financial-overhaul bill.
The Dow Jones Industrial Average (DJI) was down 100 points, or
1%, to 10,198. Home Depot (HD) was the measure's worst performer
with a drop of 2.6%, slumping with other retailers.
Pfizer (PFE) was also weak. The drug company dropped 1.9% after
saying it would suspend osteoarthritis trials of its pain drug
tanezumab after a "small number" of reports that patients' ailments
worsened to the point of needing joint replacement. The company
said the suspension followed a request by the Food and Drug
Administration.
The Dow's financial components were also among its top
decliners, with J.P. Morgan Chase & Co. (JPM) off 2% and Bank
of America (BAC) down 1.6%, as U.S. House and Senate lawmakers
sought to reach agreement Thursday on the final pieces of
legislation that is expected to tighten oversight of the financial
industry more than many had expected.
On Thursday, lawmakers agreed on new capital requirements that
will give large banks five years to stop treating trust-preferred
securities as Tier 1 capital, a key measure of a bank's strength.
The deal is a win for Senate Banking Committee Chairman Christopher
Dodd, who needed to protect the capital standards provision in
order to keep its author, Sen. Susan Collins (R., Maine), on board
with the broader bill.
"The big banks are not welcoming it. They will react negatively
in the short term," said Joe Heider, principal at Rehmann. "But
once there's some certainty about the regulations, in the long term
it benefits the financials as well as the market because they will
figure out a way to prosper out despite the regulations."
The Nasdaq Composite Index (RIXF) declined 1.2% to 2,227. The
Standard & Poor's 500 Index (SPX) slipped 1.1% to 1,080, with
its consumer-discretionary and financials sectors leading the
drop.
In the consumer-discretionary sector, Bed Bath & Beyond
(BBBY) dropped 4.3%. The house wares retailer's fiscal
first-quarter profit climbed 58%, but its current-quarter earnings
outlook fell below analysts' estimates.
Nike (NKE) declined 3.9%. The athletic show and apparel maker's
fiscal fourth-quarter profit climbed 53%, but its revenue growth
missed analysts' expectations. In addition, Darden Restaurants
(DRI), owner of Olive Garden and the Red Lobster chains, fell 4.9%
after reporting its fiscal fourth-quarter earnings fell 6% as sales
slipped.
The results pulled other consumer-discretionary stocks lower,
especially retailers. J.C. Penney (JCP) dropped 5.8%, Macy's (M)
slipped 5.6% and Nordstrom (JWN) slid 4.4%.
U.S. economic data were mixed. Weekly jobless claims fell more
than expected, and there was a smaller-than-feared drop in
durable-goods orders. However, manufacturing activity in the
Federal Reserve Bank of Kansas City's district slowed in June. Of
greater worry, producers grew more cautious about the future and
employment turned negative again, according to data released by the
bank Thursday.
The manufacturing data added to investors' worries a day after
the Federal Reserve's policy-making body kept its key interest rate
near zero, as expected, but cast its policy statement with more
downbeat language. "Financial conditions have become less
supportive of economic growth on balance, largely reflecting
developments abroad," namely in Europe, the central bank said in
its Wednesday statement.
The euro edged up to $1.2318 recently, reversing earlier
declines. The U.S. dollar index (DXY), reflecting the U.S. currency
against a basket of six others, was flat. Treasurys rose, pushing
the yield on the 10-year note down to 3.08%. Crude-oil futures fell
below $76 a barrel while gold futures advanced.
Among stocks in focus, Lennar (LEN) dropped 1.3%. The home
builder swung to a fiscal second-quarter profit, easily beating
analysts' estimates, helped by higher revenue. However, orders and
deliveries fell.
Hasbro (HAS) shares rose 2.2%. Private-equity firm Providence
Equity Partners approached the toy maker to take the company
private in a leveraged buyout, people familiar with the matter
said. Hasbro said its board has no interest in pursuing a
transaction.