FedEx, financials take stocks down
Stocks took a tumble Wednesday on renewed concerns about the financial sector and a profit warning by FedEx.
The Dow Jones industrial average finished down more than 130 points after dipping below the 12,000 mark for the first time since mid-March. All three major stock indexes finished down about 1% as oil prices rebounded from three consecutive daily declines.
Unease about financial stocks intensified after regional banking company Fifth Third Bancorp said it planned to slash its dividend by nearly two-thirds and raise $2 billion.
FedEx predicted that its earnings for the fiscal year that began this month would fall well short of what Wall Street had been projecting. The company blamed a weak economy and high fuel costs.
“I think the news out of FedEx today really is starting to make people second-guess some of the optimism that had been brewing over the last few weeks,” said strategist Craig Peckham of Jefferies & Co.
The Dow slumped 131.24 points, or 1.1%, to 12,029.06, a three-month closing low. During the session, the index fell as low as 11,993.64. It was the index’s second straight daily decline of more than 100 points.
Broader stock indicators also pulled back Wednesday. The Standard & Poor’s 500 index slid 13.12 points, or 1%, to 1,337.81, and the Nasdaq composite index lost 28.02 points, or 1.1%, to 2,429.71.
The Russell 2,000 index of smaller companies fell 5.86 points, or 0.8%, to 730.71.
Declining issues outnumbered advancers more than 2 to 1 on the New York Stock Exchange.
Oil prices jumped after a Bush administration spokesman signaled the government wasn’t expecting a boost in petroleum output after a conference next week in Saudi Arabia. Crude futures rose $2.67 to $136.68 a barrel on the New York Mercantile Exchange, nearly offsetting their declines over the three preceding sessions.
Government bond yields fell along with stocks. The yield on the benchmark 10-year Treasury note backtracked to 4.14% from 4.2% late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.
In the stock market, FedEx fell $1.73, or 2%, to $82.60 after predicting it would earn $4.75 to $5.25 a share in the current fiscal year, below the $5.92 a share analysts had expected, according to Thomson Financial.
An index of regional banks in the S&P; 500 tumbled 6.8% after Fifth Third said it would slice its payout to shareholders and seek to raise $2 billion by selling business units and issuing preferred stock. Fifth Third’s shares plunged $3.47, or 27%, to $9.26.
Shares of three California bank companies that cater to Chinese American customers lost ground: Los Angeles-based Cathay General Bancorp dropped $1.98, or 15%, to $11.40. San Francisco-based UCBH Holdings fell 33 cents, or 11%, to $2.54. Pasadena-based East West Bancorp declined 53 cents, or 5.8%, to $8.57.
MF Global plummeted $5.43, or 41%, to $7.83 after the broker of futures and options predicted that tight credit spreads would weigh on earnings. Morgan Stanley reported a 61% drop in fiscal second-quarter profit. But the results were better than Wall Street expected, and the investment bank’s shares rose 10 cents to $40.69.
In other market highlights:
* General Motors and Ford Motor skidded after a Citigroup analyst said U.S. vehicle sales could hit a 15-year low this month. GM fell 93 cents, or 5.9%, to $14.89, its lowest price since 1982. Ford retreated 38 cents, or 5.8%, to $6.22.
* CarMax slumped $2, or 11%, to $16.34. The largest U.S. used-car retailer said earnings fell more than expected because of weak consumer spending and rising energy prices.
* Tyson Foods fell $1.22, or 8.2%, to $13.68. Fitch Ratings downgraded the chicken processor’s debt to junk levels because rising grain costs are eroding its profitability.
* General Mills jumped $1.91, or 3.1%, to $62.64. The food maker, citing strong sales in the fourth quarter, issued an earnings estimate that topped Wall Street’s expectations for the just-ended fiscal year.
* Panera Bread also lifted earnings estimates above analyst forecasts. The bakery-cafe chain’s shares rose $2.55 to $48.11.
* New York Times fell 36 cents, or 2.2%, to $16.16. The newspaper company’s ad sales sank 12% in May, pushing total revenue down 6.6%.
* Overseas, key stock indexes lost 1.8% in Britain, 1% in Germany and 1.4% in France. Shares in Japan rose 0.7%.
