By Anora Mahmudova and Carla Mozee, MarketWatch
Morgan Stanley disappoints; Delta and Halliburton top
estimates
NEW YORK (MarketWatch) -- U.S. stocks moved sharply lower on
Tuesday, amid escalating nervousness in global markets, which has
seen investors flock to haven assets such as gold and government
bonds.
A renewed slide in oil prices stoked fears of spreading global
deflation, with investors increasingly skeptical about the ability
of central banks to combat it.
The European Central Bank, is widely expected to announce its
bond-buying program on Thursday, however, the scope may disappoint
investors.
U.S. markets were closed on Monday in observance of the Martin
Luther King Jr. holiday.
The S&P 500 (SPX) drifted about 12 points lower, with
consumer discretionary and healthcare sector stocks leading the
losses. All 10 main sectors were trading lower.
The Dow Jones Industrial Average (DJI) fell about 140 points,
with more than two-thirds of its 30 components trading lower.
Johnson & Johnson was the top decliner among the blue chips,
falling nearly 3%.
The Nasdaq Composite (RIXF) also was off down about 30
points.
10-year Treasurys rallied, sending the yield down 8 basis point
to 1.76%. The yield on the benchmark debt steadily declined over
the past 12 months.
"The big elephant in the room is deflation and many portfolio
managers are beginning to adjust their models to work in a low
interest rate environment. That adjustment period spells
volatility," said Marty Leclerc, chief investment officer of
Barrack Yard Advisors.
Leclerc stressed that in the short-term, current environment
will be favorable for stocks, as investors may justify higher
price-to-earnings ratios when the real interest rates is at
zero.
Peter Cardillo, chief market economist at Rockwell Global
Capital, said today's action is all about global economy
slowing.
"We are in the midst of earnings and markets are not reacting to
positive results, and the culprit is concern about Asia and Europe.
The bond market is afraid of deflation, which is why we are seeing
such low yields on long-dated Treasurys," Cardillo said.
In economic news, a gauge of confidence among home builders
ticked down this month by one point to 57, staying close to the
highest level since late 2005, according to National Association of
Home Builders/Wells Fargo data released Tuesday morning. Readings
above 50 signal that builders, generally, are optimistic about
sales trends.
Homebuilder stocks were down sharply. PulteGoup Inc. (PHM), and
D.R. Horton Inc. (DHI) both fell more than 4%.
Stock futures had been climbing after better-than-expected
economic data from China, whose gross domestic product expanded
7.4% last year, beating market expectations of 7.2%. Still, that
marked the slowest rate of growth since 1990 for the world's
second-largest economy. Meanwhile, European equities were trading
around seven-year highs ahead of an expected unleashing of a
sovereign bond-buying plan by the European Central Bank when policy
makers meet on Thursday.
Earnings results: Morgan Stanley's (MS)quarterly results missed
analyst expectations and shares fell.
Delta Air Lines Inc. (DAL) shares jumped after the company beat
estimates,reporting fourth-quarter revenue of $8.24 billion, up
4.6%.
Halliburton Co. (HAL) shares fell after the company reported
better-than-expected results, but warned that 2015 could be a
challenging year for the oil-field servicing company, which is
planning to acquire Baker Hughes Inc. (BHI)
Consumer products heavyweight Johnson & Johnson (JNJ) beat
profit expectations, but sales fell shy of estimates. Shares fell
more than 3%.
SAP SE (SAP) dropped its midterm profit margin forecast and
reported a 1% decline in fourth-quarter profit, hurt by its shift
to cloud-based products.
Google Inc. (GOOG) is close to investing about $1 billion in
Space Exploration Technology Corp. to support its effort to deliver
Internet access via satellites, according to The Wall Street
Journal. Space X is backed by Tesla Motors Inc. (TSLA) chief Elon
Musk.
Twitter Inc.(TWTR) in a blog post Tuesday said it's buying
India-based mobile-marketing company ZipDial for an undisclosed
sum.
DreamWorks Animation SKG Inc.(DWA) last week started letting
workers go, The Wall Street Journal reported.
Other markets: Chinese stocks rose nearly 2% after Monday's
selloff and Japan's Nikkei Average closed 2.1% higher, its
strongest percentage gain in a month.
Gold futures (GCG5) were up more than 1.5%. Oil futures (CLH5)
fell more than 4%, trading at about $47 a barrel.
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