Dow Dives Below 11,000 on China Rate Hike, Earnings

Stocks fell sharply Tuesday after a surprise rate hike from China's central bank and mixed quarterly earnings reports led to heavy selling in technology, materials and energy stocks. The dollar rose while gold and oil fell amid concern that any move by China to curb its growth could slow the pace of global recovery.

The blue-chip Dow Jones Industrial Average ($INDU) lost 165 points, or 1.5%, to close at 10,979. The tech-heavy Nasdaq Composite ($COMPX) dropped 44 points, or 1.9%, to settle at 2,437. The broader S&P 500 ($INX) shed 19 points, or 1.6%, to close at 1,166.

U.S. equities followed European markets lower after China raised its key interest rate for the first time since 2007 in order to control inflation in a potentially overheating economy. China's gross domestic product grew more than 10% in the second quarter.

The U.S. Dollar Index, which measures the greenback against a basket of currencies, had its steepest increase in two months.
Gold fell $39 an ounce to settle at $1,333 on the Comex division of the New York Mercantile Exchange (CME), while oil slipped $3.63 to $79.45 a barrel.

As the engine of the global recovery, China's new policy especially hurt energy, commodities and materials stocks. Dow components ExxonMobil (XOM) and Chevron (CVX) each fell 2%. Alcoa (AA) lost 3.7% and Caterpillar (CAT) lost nearly 2%.

International Business Machine (IBM) led the Dow lower after investors found fault with the company's quarterly earnings report late Thursday. Shares dropped 3.7% on the day. Disappointing earnings news from Apple (AAPL) late Thursday and the loss of a key executive at Microsoft (MSFT) also weighed on tech stocks.

Financials, meanwhile, held up relatively well, even after more mixed earnings reports. Bank of America (BAC), the nation's largest bank by assets, reported a surprise quarterly loss early Tuesday. Separately, the firm is facing pressure to buy back $47 billion in bad mortgages packaged by Countrywide, according to a media report. The Dow component fell 4.5%.

On the other side of the ledger, Goldman Sachs (GS) reported sharp declines in third-quarter earnings and revenue, hurt by slower trading activity over the summer, but its profits still easily exceeded analysts' average forecast. Shares rose 2% in a down market.



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demsareforsale

Unemployment still over 9.6%? Yup Housing foreclosures still the highest in over 20 years---Yup National deficit still expanding---Yup Illegal immigration still continuing and costing tax payers millions---Yup Dems behind in the polls nationally---Yup

October 20 2010 at 12:37 PM Report abuse +1 rate up rate down Reply
ultraz2

30 YEAR MORTGAGE INTREST RATES GOING TO 2 1/2 TO 3 % OR LESS, IN AN EFFORT TO STIMULATE THE STALLED US ECONOMY, STARTING IN NOVEMBER.

October 20 2010 at 12:24 AM Report abuse rate up rate down Reply
cpo1514

There's a real surprise. Time for the Chosen One to borrow more $$$ from China to give to folks??? Run up the debt a few trillion $$$ more??? Now that's change we never needed. Time to clean out the Obama sock puppets on election day !!!!!!!!!!!!!!!!!!

October 19 2010 at 8:02 PM Report abuse +1 rate up rate down Reply
2 replies to cpo1514's comment
demsareforsale

You are a terrible liar Miserable and certainly an OF----your Party is in the toilet and it is because of Obama----hold tight to that change it is doing you no good

October 20 2010 at 12:33 PM Report abuse +1 rate up rate down Reply
cnc machine expe

I remeber when 9000 was good. So whats the big deal?

October 19 2010 at 7:59 PM Report abuse rate up rate down Reply
1 reply to cnc machine expe's comment
cnc machine expe

USA MONEY SHOULD BE BETTER .To bad there is not much made here anymore

October 19 2010 at 7:56 PM Report abuse rate up rate down Reply
agonza2677

IF WE CONTINUE GIVING CHINA ALL OUR BUSINESS, WE WILL NOT BE THE USA WE ARE, BECAUSE I AM OLD I WILL NOT SEE IT BUT I AM PETRIFIED FOR MY GRANDKIDS

October 19 2010 at 7:20 PM Report abuse +3 rate up rate down Reply
Robert & Lisa

The party's over. Obama and thugs have took us from bad to worse

October 19 2010 at 6:33 PM Report abuse +2 rate up rate down Reply
ajgorm

China ups their interest rates the dollar up and Gold down and the market down. All because China had a 10 % growth and now they need to slow down. Very good idea raise rates and take a breath....America does not want or need a strong dollar when it comes to debt. When we go to buy we want purchasing power from our dollars ,,, But , we have deflation more debt and now a stronger dollar so what next a market correction possibly... If China ups their rates that means they buy less we export less plus our dollar goes up making our goods more expensive. Double Dip is not a sure thing it seems to be getting closer to reality ...

October 19 2010 at 6:19 PM Report abuse +2 rate up rate down Reply
bmasona

Wow! and down we go with China on top.

October 19 2010 at 4:37 PM Report abuse +2 rate up rate down Reply