By Kristina Peterson
NEW YORK (MarketWatch) -- U.S. stocks dropped Tuesday, as fears
of higher interest rates in China and the potential for a new round
of bailouts in the European Union fueled unease over the global
economy.
The Dow Jones Industrial Average (DJI) fell 76 points, or 0.7%
to 11236. Alcoa (AA) led the Dow's declines, falling 2.5% as
worries over rate hikes in China weighed on basic materials stocks,
which have benefited from the growing country's demand.
The Nasdaq Composite (RIXF) shed 0.6% to 2498. The Standard
& Poor's 500-share index fell 0.7% to 1190. The energy and
material sectors led the measure lower.
Among lagging energy stocks, contract-drilling company Rowan
(RDC) fell 4.3%, while coal and gas producer Consol Energy (CNX)
slid 2.9%. Exxon Mobil (XOM) fell 1.8% after a Nigerian militant
group sized seven workers in a raid on an Exxon facility and
threatened to launch a major operation against other oil facilities
across the Niger Delta.
Abroad, fears of monetary tightening continued to spur broad
stock losses in Asia. China's Shanghai Composite index slumped 4%
after new limits were announced that restrict the ability of
foreigners to buy residential or commercial property on the
mainland, in the country's latest effort to ease inflationary
pressures. China's State Council is drafting measures aimed at
curbing overly fast price rises, a government statement said
Tuesday.
Meanwhile, the Bank of Korea raised its base rate by a
quarter-point to 2.50% in an effort to stem inflationary
pressures.
In Europe, concerns simmered over whether Ireland, and
potentially Portugal, will be forced to accept bailouts from the
European Union. Ireland has so far resisted, saying it is fully
funded until mid-2011. The Stoxx Europe 600 was recently down
1.4%.
The U.S. dollar (DXY) weakened against both the euro and the
yen. The euro was trading recently at $1.3602, up from $1.3569 in
New York on Monday.
A host of U.S. retailers gained Tuesday after releasing their
quarterly reports.
High-end department store chain Saks (SKS) jumped 3.5% after its
third-quarter earnings beat expectations as profit surged 43% in
the latest quarter and margins benefited from more full-priced
sales.
Shares of retail giant Wal-Mart Stores (WMT) rose 2.1% after its
fiscal third-quarter earnings rose 9.3%. U.S. same-store sales fell
for a sixth straight quarter but international operations again
drove better results. Wal-Mart also raised its current-year
earnings forecast.
Home Depot (HD) was the Dow's top performer, rising 2.8% after
boosting its earning expectations for the year, though sales will
miss its previous growth forecast. Third-quarter earnings rose 21%,
beating analysts' estimates, as sales and margins improved, helped
by cost controls and share repurchases.
Teen-apparel retailer Abercrombie & Fitch (ANF) added 2.3%
after its fiscal third-quarter profit rose 29%, topping Street
expectations despite narrower margins. The company benefited from
an 87% rise in international sales in the latest period.
However, discount retailer TJX (TJX), parent of T.J. Maxx
Marshalls, fell 0.4%, even as third-quarter earnings rose 7% and
topped its own forecasts as sales improved, but some worried that
discount chains could see growth slow as they bump up against
stronger year-earlier quarters. The stock has risen 25% this
year.
U.S. economic data indicated disinflation pressures remain in
the economy. The index of producer prices, which measures how much
manufacturers and wholesalers pay for goods and materials, rose a
seasonally adjusted 0.4% last month, below economists' forecast for
a 0.9% gain. Stripping out more-volatile food and energy prices,
however, wholesale prices fell by 0.6% in October, the sharpest
drop in more than four years.
Separately, U.S. industrial production was unchanged in October,
just under economists' expectations for a 0.3% rise. Capacity
utilization was steady at 74.8% in October, a hair under estimates
of 74.9%.
Demand for U.S. Treasurys rose, sending the yield on the 10-year
note (UST10Y) down to 2.87%. Crude-oil prices slipped below $84 a
barrel, while gold futures also declined.