Slowing economy stifles stocks

October 19, 2011: 4:19 PM ET
U.S. stock markets

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NEW YORK (CNNMoney) -- U.S. stocks closed lower Wednesday, after the Federal Reserve released a pessimistic report on regional economic activity.

The Dow Jones industrial average (INDU) closed down 72 points, or 0.6%. The S&P 500 (SPX) shed 15 points, or 1.3%. The Nasdaq composite (COMP) lost 53 points, or 2%.

The three "E"s -- the economy, Europe, and earnings -- continue to dominate. But with few reports of consequence out of Europe, investors had been focusing on the latest earnings reports, keeping stocks mostly near the breakeven line for much of the day.

But stocks took a hit in the afternoon after the Fed's "Beige Book" painted a picture of an economy that's losing steam. The report made caused investors nervous.

"The market has so been so extraordinarily whippy that people don't like to play in that environment," said Peter Boockvar, equity strategist at Miller Tabak + Co. "It's too dizzying."

Apple's earnings miss dragged the tech sector lower, while insurer Travelers was among the few standouts, giving investors hope for the insurance industry's prospects.

Travelers (TRV, Fortune 500) sparked a rally among insurance stocks when it reported earnings Wednesday. The company told investors that consumers were willing to accept higher insurance premiums. Travelers' stock closed the day up 6%. Chubb (CB, Fortune 500), and Allstate (ALL, Fortune 500) followed suit, ending the day up 0.1% and 2.1% respectively.

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Still, market participants said that trading was relatively light, with many investors remaining gun shy, following the recent volatile roller coaster moves.

On Tuesday, stocks surged into the close, following a report suggesting that Europe's bailout fund may get a big boost.

The gains pushed the Nasdaq into positive territory for 2011, while the Dow is at breakeven. The S&P 500 remains in the red, but the broad index finished at its highest level since Aug. 3.

Economy: The latest economic report showed inflation took a bigger bite out of consumers' wallets in September. A 3.9% jump in prices over the last 12 months marked the biggest rise in three years.

Inflation came in as expected in September, with the Consumer Price Index rising 0.3% during the month.

Core CPI, which strips out volatile food and energy prices, rose 0.1% in September.

For the year, CPI is up 3.9%, the biggest annual change in 3 years.

A separate report showed housing starts were stronger than expected in September, while permits for future building fell.

On Tuesday, Moody's Investors Service downgraded Spain's government bond ratings to A1 from Aa2. This follows similar action taken by Standard & Poor's last week.

Companies: After the market closed Tuesday, Apple (AAPL, Fortune 500), the maker of Macs and iPhones, reported a 39% increase in third quarter sales to $28.3 billion. But the figures fell short of forecasts.

Morgan Stanley (MS, Fortune 500), which has had investors worried about its exposure to Europe, posted a solid $2.2 billion profit before Wednesday's opening bell.

Also late Tuesday, Dow component Intel (INTC, Fortune 500) announced earnings that beat analysts' estimates and sales that hit a new high.

And Yahoo (YHOO, Fortune 500) said reported third-quarter sales and earnings that fell compared to last year, but came in ahead of analyst forecasts.

Early Wednesday, Dow component United Technologies (UTX, Fortune 500) beat revenue estimates.

BlackRock (BLK, Fortune 500), the world's largest money manager, surpassed forecasts on both sales and profit for the quarter.

Shares of Abbott Laboratories (ABT, Fortune 500) rose after the medical company said it will split into two separate publicly traded companies. One company will be focused on medical products, and retain the name Abbott, and the other will focus on research-based pharmaceuticals, with a name to be revealed at a later date.

Abbott also released earnings that came in slightly above expectations.

American Express (AXP, Fortune 500) and eBay (EBAY, Fortune 500) announced quarterly earnings after the markets closed.

World markets: European markets all closed slightly higher. Britain's FTSE 100 (UKX) ended up 0.6%, the DAX (DAX) in Germany gained 0.4% and France's CAC 40 (CAC40) added 0.3%.

Asian markets ended mixed. The Shanghai Composite (SHCOMP) slipped 0.3%, while the Hang Seng (HSI) in Hong Kong rose 1.3% and Japan's Nikkei (N225) ticked up 0.4%.

Currencies and commodities: The dollar fell against the euro, the Japanese yen and the British pound.

Oil for November delivery decreased $2.26 to $86.14 a barrel.

Gold futures for December delivery dropped $9.40 to $1,643.40 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury fell, barely pushing the yield up to 2.16% from 2.15% late Tuesday.  To top of page

Index Last Change % Change
Dow 17,778.15 421.28 2.43%
Nasdaq 4,748.40 104.09 2.24%
S&P 500 2,061.23 48.34 2.40%
Treasuries 2.20 0.06 2.61%
Data as of 10:25pm ET
Company Price Change % Change
Bank of America Corp... 17.53 0.27 1.56%
Apple Inc 112.65 3.24 2.96%
Oracle Corp 45.35 4.19 10.18%
General Electric Co 25.14 0.71 2.91%
Microsoft Corp 47.52 1.78 3.89%
Data as of 4:03pm ET
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.12%4.00%
15 yr fixed3.14%3.00%
5/1 ARM3.25%3.01%
30 yr refi4.17%4.06%
15 yr refi3.21%3.09%
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