US stocks fell yesterday after three days of gains when a meeting between the heads of France and Germany failed to quell fears about the ability of the Eurozone leaders to contain the region’s sovereign debt woes.
Efforts to stem the spreading European debt crisis have so far been ineffective, partially causing the equity market to decline in recent weeks. Stocks were unable to rally yesterday despite positive US earnings and the decision by Fitch Rating to keep the country’s AAA credit rating less than two weeks after Standard & Poor's downgraded the US to AA-plus.
Shares of financials, seen as vulnerable to a European fiscal crisis, added to their decline and were the worst performing sector in the S&P 500. The S&P financial index was down 1.9 per cent.
Merkel and Sarkozy said they would propose a tax on financial transactions, which hurt shares of exchange operators. Shares of NYSE Euronext fell 8.4 per cent to $26.54, making it the worst performer in the S&P 500.
“We have France out with no growth yesterday and Germany out with no growth today. It broadens a picture that global economies have experienced a simultaneous pause,” said Fred Dickson, chief market strategist at DA Davidson & Co.
Shares of retailers Wal-Mart Stores and Home Depot both rose after the industry bellwethers exceeded analysts’ expectations for quarterly numbers. Wal-Mart shares advanced 3.9 per cent to $51.92 after the company said US same-store sales turned positive in July. Home Depot shares gained 5.2 per cent to $33.12 after the company raised its fiscal-year profit forecast for the second time in three months.
Dell’s shares dropped 4.9 per cent in after-hours trading after the company reported revenue slightly below analysts’ expectations and said sales in the present quarter would be flat.
The Dow Jones industrial average dropped 76.97 points, or 0.67 per cent, to 11,405.93. The Standard & Poor's 500 Index declined 11.73 points, or 0.97 per cent, to 1,192.76. The Nasdaq Composite Index fell 31.75 points, or 1.24 per cent, at 2,523.45.
About 8.2bn shares were traded on the NYSE, the American Stock Exchange and Nasdaq, roughly in line with last year’s daily average of 8.47bn. About three stocks fell for every advancer on the NYSE and about four shares declined for every advancing stock on the Nasdaq.