While you were sleeping: Wall St sinks as earnings loom, oil extends slide

Wednesday 8th July 2009

Stocks on Wall Street declined as investors braced for the start of the second-quarter earnings season and an adviser to President Barack Obama floated the prospect of a second stimulus package.

Exxon Mobil Corp. fell 2.3% to US$66.56 and Chevron Corp. shed 2.3% to US%62.70 as the price of crude oil extended its slide. Manufacturers paced the decline on the Dow Jones Industrial Average, with DuPont sinking 5.1% to US$24.04, Caterpillar Inc. falling 4.5% to US$30.20 and Boeing Co. declining 3.8% to US$39.04.

The Dow fell 1.9% to 8163.60 and the Standard & Poor’s 500 dropped 2% to 881.03. The Nasdaq Composite declined 2.3% to 1746.17.

Alcoa Inc. climbed 1.6% to US$9.41, the biggest gain on the Dow. The aluminium producer is the first major company to report in an earnings season that’s expected to show profits at S&P 500 companies fell an average 34%, according to Bloomberg. Alcoa gained, though, after chief executive Klaus Kleinfeld said in a Bloomberg interview that he is “very optimistic” about sales in China while there are signs US automakers are starting to recover.

Laura Tyson, an Obama adviser, said a second stimulus package may be needed in the US, focusing on infrastructure projects. The comments stoked concern the world’s biggest economy isn’t recovering as much as hoped.

House of Representatives Majority Leader Steny Hoyer said lawmakers should be open to the possibility of a second stimulus package to stoke an economy that is still shedding jobs.

A record number of Americans fell behind on their bills in the first quarter, according to the American Bankers Association. Delinquencies on credit card debt soared rose to a record 6.6% from 5.5% in the final three months of 2008 as more people used their cards to meet day-to-day expenses, the ABA said.

Late payments on home equity loans rose to 3.52% from 3.03%. A gauge of late payments across eight types of loans rose 3.23%.

The yen and the US dollar strengthened as doubts about a recovery in the global economy stoked demand for the safety of the biggest currencies. The yen climbed against the greenback as Japanese investors, fretting about US earnings, brought their funds home.

The euro fell to $1.3925 from $1.3984 yesterday and sank to 131.97 yen from 133.34. The dollar weakened to 94.78 yen from 95.35.

China, Russia and Brazil will push for a new global reserve currency at the Group of Eight summit in Italy, according to officials.

Kremlin economic aide Arkady Dvorkovich said China and Russia would “state their stance that the global currency system needs smooth evolutionary development,” Reuters reported. Brazilian President Luiz Inacio da Silva said he wants to explore new trade relations that didn’t depend on the dollar. Brazil, China and Russia are to attend the second day of the G-8.

Still G-8 members such as Germany played down the prospects of a big debate over the greenback, saying the rise in prominence of other currencies would occur only gradually. Some 70% of China’s foreign currency reserves arte in dollars.

Crude oil extended its decline on doubts about the prospects of an early economic recovery as the Obama adviser raised the possibility of a second stimulus package.

US crude futures slipped US$1.12 at $62.93 a barrel.

Still, US Energy Department figures this week are expected to show a decline in inventories of crude oil and the US Energy Information Administration raised its outlook for global oil demand by 170,000 barrels per day.

Gold futures for August delivery fell 0.1% to US$923.20 an ounce on the New York Mercantile Exchange, paring an earlier advance as the dollar strengthened.

US Treasuries advanced as the government sold US$35 billion of three-year notes to yield 1.519%, the lowest since May, and as talk of a second stimulus package stoked concern about a prolonged recession.

The yield on the 10-year notes fell 0.7% to 3.45% while the yield on the 30-year Treasury declined 0.7% to 4.29%.

The sale is the second of four this week for a total US$73 billion. Investors such as foreign central banks bought 54% of the notes on sale, up from 43.8% at the last auction.

In Europe, the Dow Jones Stoxx 600 Index fell 0.7% to 200.20, the lowest in more than two months on concern second-quarter earnings will disappoint and oil producers declined with the price of crude.

Air France-KLM Group declined 2.9% after reporting the sixth straight month of weaker passenger traffic.

Germany’s DAX Index fell 1.2% to 4598.19 even as the Economy Ministry reported manufacturing sales, seasonally adjusted rose 4.4% in April. France’s CAC 40 fell 1.1% to 3048.57.

The UK’s FTSE 100 fell a milder 0.2% to 4187 after a survey from the British Chambers of Commerce showed a pickup in confidence among manufacturers and service companies in the three months through June.

Businesswire.co.nz

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