Wednesday 26th October 2011
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Concern about disappointing earnings from companies including Netflix and 3M, and a cancelled meeting from European Union finance ministers weighed on Wall Street.
Netflix suffered, with the stock tanking more than 35 percent, after the company said yesterday after the market closed that it lost more customers than it expected in the third quarter and warned of more departures ahead. 3M slashed its 2011 forecast.
The shortfall in profits re-ignites concern that the economic outlook is gloomy. That’s reflected in U.S. consumer confidence too, which unexpectedly dropped in October to the lowest level in 2-1/2 years.
Compounding investors’ worries is the seemingly never-ending uncertainty about the ability of euro zone leaders to get a grip on the region’s debt crisis.
While the summit by EU leaders is still expected to proceed on Wednesday as scheduled, the cancellation of the finance ministers’ meeting didn’t impress.
"Everyone thought that with the meeting and summit we had the European situation more or less wrapped up, but the news of the cancellation creates a lot of negatives with respect to a near-term resolution," Steven Neimeth, a money manager at SunAmerica Asset Management in Jersey City, New Jersey, told Reuters.
Wednesday’s summit is aimed at boosting the region’s rescue fund, recapitalising banks and easing Greece’s debt burden.
The Stoxx Europe 600 index ended the day with a 0.7 percent fall.
In afternoon trading in New York, the Dow Jones Industrial Average fell 0.81 percent, the Standard & Poor's 500 Index dropped 1.04 percent and the Nasdaq Composite Index shed 1.27 percent.
It was an environment that increased the appeal of US Treasuries, sending yields on 30-year bonds 12 basis points lower to 3.15 percent.
“The market is very concerned that Europe will not step up to the plate,” Gary Pollack, head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York, told Bloomberg News. “It’s driving demand across the entire Treasury curve.”
There were a few bright spots. Xerox posted earnings that exceeded expectations.
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