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Stocks Sharply Lower After Alarming Drop In Consumer Sentiment
Stocks are posting steep losses in mid-morning trading on Friday, as a thoroughly disappointing reading on July consumer sentiment sent equity prices into a downward spiral. The downside has also come as a mixed batch of earnings may have lessened trader expectations of a strong second quarter earnings season.
A short time ago, the markets extended their earlier losses after Reuters and the University of Michigan reported that their consumer sentiment index plummeted to a reading of 66.5 in July from the final June reading of 76.0. Economists had been expecting the index to show a much more modest decrease to a reading of 74.5.
Also on the economic front this morning, the Labor Department released a report showing that consumer prices edged down by 0.1 percent in June, in line with expectations. Meanwhile, core prices, which exclude food and energy prices, increased by 0.2 percent in June, just above expectations for a pickup of 0.1 percent.
Earlier, markets were presented with quarterly results from Bank of America Corp. (BAC), Citigroup Inc. (C) and General Electric Co. (GE), all of which beat profit expectations but failed to meet revenue forecasts.
Goldman Sachs (GS) is on the upside following news that it has reached a settlement agreement with the SEC over claims of securities fraud linked to its mortgage investments. Under the settlement, Goldman will pay $300 million in fines to the Treasury Department and about $250 million as restitution to investors.
Tech-giant Apple (AAPL) has reportedly set up a press conference for 1 p.m. ET to answer questions regarding consumer complaints of poor reception on the iPhone 4. The device saw the strongest product launch in company history.
In other news, BP Plc's (BP) new cap on the troublesome oil well in Gulf of Mexico is seeing success in sealing the leak after 87 days of spillage. The stock is seeing a partial recovery from a fourteen-year closing low set last month.
The major averages have slowed their decline in recent trading but are currently lingering near their session lows. The Dow is down 168.97 points or 1.6 percent at 10,190.34, the Nasdaq is down 41.60 points or 1.9 percent at 2,207.48 and the S&P 500 is down 19.54 points or 1.8 percent at 1,076.94.
Sector News
Banking stocks are among the morning's worst performers, with the KBW Bank Index posting a loss of 3.8 percent. Despite the sharp drop, the index remains in a recent range.
Bank of America is turning in one of the sector's worst performances despite reporting second quarter earnings that exceeded analyst estimates. Shares of the banking giant are currently down by 7 percent, pulling back further its recent highs.
Before the start of trading, Bank of America said its second-quarter net income came in at $0.27 per share, topping expectations for $0.22 per share. However, the company reported total revenue for the quarter of $29.15 billion, short of the $29.75 billion forecast for the period.
Gold, networking, railroad and airline stocks are also under pressure, further contributing to the sharp drop by the major averages. Notably, the NYSE Arca Gold Bugs Index is down by 3.2 percent and is on pace for a six-week closing low.
The weakness in the gold sector comes as the price of the precious metal has plummeted by $20.10 to $1,118.20 an ounce.
Stocks Driven By Analyst Comments
Ritchie Bros. (RBA) is notably lower after being downgraded at RBC Capital Markets from Sector Perform to Underperform. The broker also lowered its target on the stock from $18 to $16. Shares are currently down by 4.8 percent, sinking to a fifteen-month intraday low.
Alliant Energy (LNT) is also on the downside following a downgrade by analysts at Wunderlich from Buy to Hold. The stock is posting a loss of 2.4 percent, falling from its best closing price in nearly three months.
Other Markets
In overseas trading, stocks across the Asia-Pacific region were mostly lower to close out the week. Japan's benchmark Nikkei 225 Index ended the day down by 2.9 percent.
The major European markets are also seeing steep losses. The U.K.'s FTSE 100 Index is down by 0.7 percent, while the French CAC 40 Index and the German DAX Index are down by 2.1 percent and 1.6 percent, respectively.
In the bond markets, treasuries are moderately higher amid the weakness on Wall Street. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is trading at 2.947 percent, posting a loss of 3.1 basis points.