Stocks Plunge on Wall Street, Wiping Out July's Gains

Wall Street
Richard Drew/AP

NEW YORK -- For investors, there were few havens on Thursday.

The stock market had its worst one-day drop since February, driven down by a confluence of worries, from weak company earnings to the looming end of stimulus from the Federal Reserve.

But it wasn't just stocks that suffered; oil fell to its lowest level since March, gold dropped and even Treasury notes edged lower.

Stocks started the day lower after a dose of bad earnings news, and the losses accelerated throughout the day.

Whole Foods Market (WFM) and Exxon Mobil (XOM) were among companies that fell after reporting results or forecasts that disappointed investors.

The stock market has been on a bull run for more than five years, with the most recent leg of that surge pushing the Standard & Poor's 500 index (^GPSC) to an all-time high a week ago. Investors are now getting concerned that stocks may have climbed too far and reflect too much optimism on the outlook for growth.

"We've been on a strong run," said Jerry Braakman, chief investment officer at First American Trust. "There's just more concern that stock valuations are rich compared to historical norms."

The S&P 500 dropped 39.40 points, or 2 percent, to 1,930.67, its biggest loss since April 10. The drop pushed the index to its first monthly loss since January.

The Dow Jones industrial average (^DJI) plunged 317.06 points, or 1.9 percent, to 16,563.30. The Nasdaq composite (^IXIC) fell 93.13 points, or 2.1 percent, to 4,369.77. The Russell 2000 (^RUT), an index of small company stocks, plunged 26.50 points, or 2.3 percent, to 1,120.07

Exxon Mobil stock fell $4.31, or 4.2 percent, to $98.94 after the energy company said that oil and gas production slipped 6 percent, disappointing analysts. The decline was driven by the expiration of rights to a field in Abu Dhabi and natural field declines.

Investors are also concerned about the outlook for growth in Europe as tensions escalate between the European Union and Russia after the downing of a passenger plane over Ukraine. The European Union on Thursday revealed the details of broad economic sanctions against Russia.

The main driver behind Thursday's sell-off was a reassessment of the outlook for interest rates in the U.S. said Paul Zemsky, chief investment officer of Multi-Asset Strategies and Solutions at Voya Investment Management.

Fed policymakers said the central bank would make further cuts to its monthly bond purchases, a program that is intended to keep long-term interest rates low and encourage borrowing and spending. Policy makers are also becoming more optimistic about the outlook for the U.S. economy after growth expanded by a better-than-expected 4 percent in the second quarter.

"We're closer to the first move higher in interest rates," said Zemsky. "And there's definitely a camp that believes that the only reason that were at these levels is because the Fed has kept the rates at zero."

Despite Thursday's weak earnings reports, the overall outlook for company profits is still strong, said Zemsky.

Company earnings are still at record levels, and expected to grow by 8.6 percent in the second quarter, according to data from S&P Capital IQ. That compares to growth of 4.9 percent in the same period a year ago and 3.4 percent growth in the first three months of this year.

Gold fell $13.60, or 1.1 percent, to $1,281.30 an ounce. Silver fell 19 cents, or 0.9 percent, to $20.41 an ounce.

Benchmark U.S. crude fell $2.10 to close at $98.17 a barrel in New York, its lowest level since March 17. Oil's high for the year was $107.26, set on June 20; its low was $91.66, set on January 9.

Brent crude, a benchmark for international oils used by many U.S. refineries, fell 49 cents Thursday to close at $106.02 in London.

Prices for U.S. government bonds were little changed. The yield on the 10-year Treasury note edged up to 2.57 percent from 2.56 percent Wednesday.

What to Watch Friday:
  • Automakers release vehicle sales for July throughout the day.
  • At 8:30 a.m. Eastern time, the Labor Department releases employment data for July, and the Commerce Department releases personal income and spending for June, 8:30 a.m.
  • The University of Michigan releases its final survey of consumer sentiment for July at 9:55 a.m.
  • At 10 a.m., the Institute for Supply Management releases its manufacturing index for July, while the Commerce Department releases construction spending for June.
These major companies are due to release quarterly financial statements.
  • Berkshire Hathaway (BRK-A) (BRK-B)
  • Burger King Worldwide (BKW)
  • Chevron (CVX)
  • Clorox (CLX)
  • Hilton Worldwide Holdings (HLT)
  • Procter & Gamble (PG)
  • U.S. Cellular (USM)
  • Weyerhaeuser (WY)

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So the 1% lose a little pocket change. Big deal. Most working tax payers can't afford the luxury of investing in the stock market when 46% of us live paycheck to paycheck. Funny how there might not be enough money to cover SS in the future, but the welfare fund is a bottomless pit!

August 01 2014 at 6:21 AM Report abuse -1 rate up rate down Reply

I said over the weekend that stocks were inflated.....

This stock market is thee most manipulated game on the planet... The banks control over 50% of every major public company and can control prices for their clients that have mutual funds, IRAs like ROTH and 401k. Trust funds are often controlled by banks too.. So, banks have more power than just what they have to invest.. They control what most workers and retirees are doing too... So, it is easy for them to control it all...

I knew stocks were inflated because it is too soon to be topping 17,000 on the DOW... I like the DOW because it goes back a 100 years and you can see how it has climbed since 1933 (what Ben Graham called the post-war economy in his book "The intelligent investor, a guide to value investing".. According to historical charts, the DOW will top out between 17,600 and 18,500 before the next major recession and selloff hits. The selloff will come before the recession.. The latest stock market surge was too soon.. I should have jumped in a shorted everything, but guessing what the banks are going to do is a fool's game of speculation..

the stock markets will surge and retreat a 1000 points either way and over the course of a year will climb around 600 points per year for the next 4 years... Predicting these swings is tough, but knowing what stocks are going to do over the course of 10 years is easy.

August 01 2014 at 1:45 AM Report abuse rate up rate down Reply
2 replies to socioeconomist1's comment

I would jump back in around 15,700 ish..

August 01 2014 at 1:53 AM Report abuse +1 rate up rate down Reply

Who's your Idol, Porter Stansbury ?

August 01 2014 at 3:33 AM Report abuse rate up rate down Reply

Obama's fault as everything Crashes.....
He got the Kudos when they were going up.....
Now he gets the Blame......
Also it seems he was too busy even to see if he could help Argentina out....

July 31 2014 at 10:54 PM Report abuse +1 rate up rate down Reply

The stocks have plenty of room to drop. There just isn't enough people working good full time jobs in the US to keep markets climbing.

July 31 2014 at 8:48 PM Report abuse +2 rate up rate down Reply
1 reply to Iselin007's comment

Jobs have nothing to do with stocks, dude.... You listen to the media way too much. If jobs had anything to do with stocks, then the stock markets wouldn't have tripled in value while unemployment stayed over 7% from 2009 to 2013.

August 01 2014 at 1:50 AM Report abuse rate up rate down Reply
1 reply to socioeconomist1's comment

But the speculators wait patiently for the jobs report on Fridays, go figure.

August 01 2014 at 3:23 AM Report abuse rate up rate down

Anyone notice the price of gold didn't rise when the stocks went down.

July 31 2014 at 8:29 PM Report abuse +2 rate up rate down Reply

Threaten to take the candy away from the baby and the trandrums start once again, someone hurry get the pacifier.

July 31 2014 at 8:15 PM Report abuse +2 rate up rate down Reply
1 reply to Craig's comment

Tandrums ? WTF is a " Tandrum " ?

August 01 2014 at 3:42 AM Report abuse rate up rate down Reply

yea we remember, president Bush had a 4.9 unemployment rate n gas was $1.87 a gal n jobs were abundant ,THEN~~>JAN~20~09 ~~>"THE DISGRACING OF AMERICA .
The way people are being forced out of the labor force in droves is bringing the unemployment rate down quickly, Some 6 years later there must be over 12 million or more people aged 16 and over added to the old numbers. Yellen took notice that's why she said the labor market is under-utilized. When those interest rates go back there is going to be a lot of people losing their shirts.

July 31 2014 at 8:07 PM Report abuse rate up rate down Reply

Please stop complaining about an over valued Dow 's tiny little drop of 317 points. I'm sure it will one day be over inflated again. The Dow's still over 16 K . The incredible spinning of the jobs number by the BLS will not fool the Fed's Yellen into letting interest rates to rise or jump.

One analyst said the economy has been down this long it's about time for another down turn again.

July 31 2014 at 7:46 PM Report abuse -3 rate up rate down Reply

They expected a so called correction.....tomorrow will tell if the market drops another 300 points or more. Not to worry the US is bringing ebola to America! The CDC says we can handle an outbreak here better.

July 31 2014 at 7:12 PM Report abuse +1 rate up rate down Reply
2 replies to SPQR's comment

I heard it can only be spread by fluids so that could be any person handling anything that other people touch, like a door knob or fast food order. A sudden demand for Medical Assistants desperate for jobs could help Medical stocks!

July 31 2014 at 7:53 PM Report abuse -1 rate up rate down Reply

Forget ebola, we've got Obama!

July 31 2014 at 8:51 PM Report abuse rate up rate down Reply

It's Bush's fault, it's Bush's fault. But Obama will study it when he gets back from his golf vacation.

July 31 2014 at 6:36 PM Report abuse +1 rate up rate down Reply