By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
NEW YORK (MarketWatch) -- The U.S. stock investors turned
skittish on Tuesday driving major averages to their lowest levels
in months. A jarring trading day followed a series of tough weeks
in stocks marked by precipitous declines that have left the S&P
500 sitting 3.8% lower from its peak reached just three weeks ago
on Sept. 18.
The Dow Jones Industrial Average had the worst selling day in
more than two months, settling at the lowest levels since
mid-August.
Investors flocked into the safety of U.S. Treasurys, pushing the
yield down to 2.34%. Nervousness among investors was most evident
in the Wall Street's "fear gauge" - CBOE Vix index rose 12% to
17.39, the level last seen in March.
The S&P 500 (SPX) closed 29.72 points, or 1.5%, at 1,935.1.
The Dow Jones Industrial Average (DJI) dropped 272.5 points, or
1.6%, to 16,719.33. The Nasdaq Composite (RIXF) fell 69.60 points,
or 1.6%, to 4,385.20. The Russell 2000 dropped 17.17 points, or
1.4%, to 1,077.44.
Among worst hit sectors were retailers and transportation
companies. The SPDR S&P Retail ETF fell 1.8%, while the Dow
Jones Transportation Average fell 2.5%. Read: U.S. stocks test key
technical levels
Despite the recent, unsettling weakness, some strategists are
optimistic about upcoming results from third-quarter earnings.
Burt White, chief investment officer at LPL Financial, and
Jeffrey Buchbinder, market strategist at the same company, said in
a note Tuesday they expect "another good earnings season" that is
likely to boost stocks.
They listed several reasons for optimism in the current
reporting season: U.S. economic growth has picked up; upside
earnings surprises have been typical since summer 2009; the
Institute for Supply Management manufacturing Index, which has a
strong track record of predicting earnings growth six months out,
has shown solid growth in the past six months; and there have been
few signs of cost pressures. Also 'Sell Rosh Hashanah, buy Yom
Kippur' worked this year.
Braced for earnings: Yum! Brands Inc. (YUM) missed consensus
estimates on earnings and revenues. Shares fell 1% in after-hours
trade, after closing 2.3% lower.
SodaStream International Inc. (SODA)shares sank 22% in heavy
volume ahead of the bell, hit hard as the carbonated-drinks
equipment maker warned of a quarterly-sales shortfall.
The Container Store Inc. (TCS) shares fell 25%, extending their
slide late Monday after the storage-organization retailer cut its
profit and sales view.
Women's clothing retailer Christopher & Banks Corp. (CBK)
forecast quarterly sales below Wall Street's estimate, sending
shares down 26%.
Agco Corp. (AGCO) shares stumbled 11% as the
agricultural-equipment company cut its profit outlook for the year
because of weaker-than-expected demand.
Other markets: European markets closed sharply lower after
another round of downbeat German data. Asian stocks had a mixed
session, with the Nikkei 225 index down 0.7%, but Hong Kong's Hang
Seng index rose 0.5%. Gold prices (GCZ4) edged just above the key
$1,200-an-ounce level. Oil futures (CLX4) slipped, trading below
$90 a barrel.
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