New York: US stocks closed lower for a third straight day on Tuesday as Europe’s fiscal woes and a weak start to tech earnings gave investors little reason to buy even after the recent losses.
Moody’s downgrade of Ireland’s credit rating late in the session provided the latest jolt to stock investors, reminding them of the scope of Europe’s debt problems.
Equities bounced briefly following release of the Fed’s minutes with comments from Federal Reserve officials suggesting the possibility of more stimulative policies, but the move was short-lived as uncertainty over Europe kept investors away from beaten-down shares. On Monday, stocks posted their worst day in a month.
“The Fed gave us a little pop, but people are more worried about the issues in Europe right now,” said Steven Roge, portfolio manager at RW Roge & Co in Andover, Massachusetts. “That said, given the recent losses, I expect us to tread water until we get more clarity on Europe and earnings.”
European officials, for the first time, refused to rule out default by Greece. Investors feared the crisis could overtake the bigger European economies of Spain and Italy. The concern is bank exposure to troubled euro-zone debt will hurt their profits and liquidity. US-listed shares of Barclays Plc slid 2.5% to $14.60.
The region’s issues resurfaced after Moody’s downgraded Ireland’s credit rating to junk status, saying it would probably need additional rounds of official financing.
The Dow Jones industrial average fell 58.88 points, or 0.47%, to 12,446.88 at the close. The Standard & Poor’s 500 Index shed 5.85 points, or 0.44%, to 1,313.64. The Nasdaq Composite Index dropped 20.71 points, or 0.74%, to 2,781.91.
The Nasdaq underperformed the other two major US stock indexes as chipmakers’ shares fell sharply after Novellus Systems Inc said it expects bookings to continue to fall as chipmakers curb capacity. Novellus fell 11.2% to $31.75. The semiconductor index lost 2.9%.
According to the minutes of the Federal Open Market Committee’s June meeting, which were released Tuesday afternoon, some Fed officials are ready to provide more monetary policy easing if the recovery is deemed too sluggish to cut the US unemployment rate. Others, however, said the Fed should tighten sooner than expected if recent increases in inflation don’t moderate.
The Fed’s second round of quantitative easing, which ended in June, contributed to sharp equity gains. Some analysts have questioned the market’s prospects in a tighter environment.
“People were expecting a flat-out, ‘No this is it. This is the end of the line,´ and the fact that the door is still a little bit open provides a little bit of hope,” said Peter Jankovskis, co-chief investment officer of OakBrook Investments LLC in Lisle, Illinois.
Dow component Alcoa Inc fell 1.3% to $15.71 a day after reporting second-quarter earnings that met expectations, though some analysts said a recent softening of aluminum prices might affect the company’s third-quarter results.
Volume was light, with about 7.12 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year’s daily average of 8.47 billion.
About 17 stocks fell for every 13 that rose on the New York Stock Exchange, while on the Nasdaq, three stocks fell for every two that rose.