Closing Bell: Stocks Sink on Profit Warnings, Stimulus Pullback Fears

Charles Evans president federal reserve bank chicago stimulus bond buying interest rates wall street
Tim Boyle/Bloomberg via Getty ImagesFederal Reserve Bank of Chicago President Charles Evans.
Warnings of weaker profits and a possible pullback in the Federal Reserve's stimulus program helped pull the stock market down Tuesday, despite some positive economic news.

The major averages dropped about half a percent, though tech stocks fared a bit worse. The Dow Jones industrial average (^DJI) lost 93 points to close at 15,518, while the Standard & Poor's 500 index (^GPSC) fell 9 points to 1,697, and the Nasdaq composite index (^IXIC) slipped 27 points to 3,665.

A Federal Reserve voting member says the central bank is "quite likely" to start reducing its bond purchases later this year but that any change hinges on the economy showing improvement. Charles Evans, president of the Fed's Chicago regional bank, wouldn't give a firm answer about when the Fed would begin to scale back its $85 billion a month in bond buys. But, during an interview with reporters, he didn't rule out that result coming out of the September meeting.

Separately, another regional Fed chief said the central bank could start reducing its bond-buying program as soon as September. In an interview with Market News International, Atlanta Federal Reserve Bank President Dennis Lockhart said that while the Fed's easing back on monetary stimulus could come in September, the move could come at any time before the end of the year.

The U.S. economy likely grew faster than initially reported in the second quarter, thanks to a sharp narrowing in the trade deficit to its lowest in more than 3½ years in June, as exports touched a record high and imports fell. The Commerce Department said the trade gap fell 22.4 percent to $34.2 billion, the smallest since October 2009. The percentage decline was the largest since February 2009.

In company news, shares of the longtime owner of The Washington Post hit five-year highs after announcing the sale of the paper to Jeff Bezos, founder and CEO of (AMZN), for $250 million. The newspaper, which unveiled a scandal that toppled a U.S. president, has been owned by one family, the Grahams, since it was acquired in a 1933 bankruptcy sale. Class B shares of the Washington Post Co. (WPO) gained 4.3 percent, to $593 Tuesday. The stock at one point hit $605.18, a level not since September 2008.

UBS (UBS) has agreed to pay about $50 million to settle federal civil charges of misleading investors in its sale of risky mortgage bonds ahead of the 2008 financial crisis, the Securities and Exchange Commission said Tuesday. The SEC said the Swiss bank failed to disclose that it had kept $23.6 million in payments it received as it acquired collateral for the mortgage-backed securities.

General Motors (GM) plans to spend another $167 million at its Tennessee factory so it can build two new midsize vehicles, which might be new versions of the Chevrolet Equinox and GMC Terrain crossover SUVs, last reworked in 2009. The spending -- on top of a previously announced $183 million investment -- is expected to create or keep 1,800 jobs, but the automaker wouldn't say how many new people would be hired. Separately, GM said it cutting the price of its gas-electric Chevy Volt by $5,000 for the 2014 model year. Prices will start at $34,995 before a $7,500 federal tax credit.

More Stocks in the News:
  • CVS Caremark (CVS) sank 3 percent, to $59.89 after the drugstore operator lowered its earnings target for the year.
  • IBM (IBM) fell 2.3 percent to $190.99 following reports that the tech giant would require some workers to take time off this month as hardware sales slow. Credit Suisse also cut its rating on the company.
  • Sony (SNE) shares erased nearly 5 percent to end at $20.72 after CEO Kaz Hirai rejected an investor proposal to spin off its entertainment unit.
  • Shares of teen retailer American Eagle Outfitters (AEO) fell 12 percent to $17.57 a day after the teen retailer slashed its second-quarter earnings outlook, citing weak sales and profit margins during the period. American Eagle's woes spread to other teen-retailer stocks, including: Abercrombie & Fitch (ANF), down 4 percent to $49.57.; Urban Outfitters (URBN), off 2.75 percent to $42.47.; and Aeropostale (ARO), down 2.3 percent to $14.60
  • Shares Regeneron (REGN) fell more than 6 percent to $254.50 after the drug developer reported second-quarter that fell short of analyst expectations.
  • Molson Coors Brewing (TAP) gained more than 6 percent to $53.26. The beverage company reported better earnings and revenue than analysts had expected, helped by sales in central Europe. Molson bought the Czech Republic-based brewer StarBev last year.
What to Watch Wednesday:
  • The Energy Information Administration releases its latest weekly report on petroleum stockpiles at 10:30 a.m. Eastern time.
  • The Federal Reserve releases June data on consumer credit at 3 p.m.
These major companies are due to report quarterly earnings statements:
  • Duke Energy (DUK)
  • Groupon (GRPN)
  • Prudential Financial (PRU)
  • Ralph Lauren (RL)
  • Tesla Motors (TSLA)
  • Time Warner (TWX)
-Compiled from staff and wire reports.

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Separately, another regional Fed chief said the central bank could start reducing its bond-buying program as soon as September...

What? No name? This is obviously market manipulation...

August 07 2013 at 5:10 AM Report abuse +1 rate up rate down Reply

Both comments, GONE.

August 06 2013 at 11:34 PM Report abuse +2 rate up rate down Reply

CBS took away some of our channels on Time Warner's Bright House network system. The system doesn't want to raise rates on the consumer because they know they will lose customers from already inflated pricing. CBS are a bunch of ******** that said if they don't get their way they will shut off channels. Yep.. they shut them off. We haven't had the Fox Network in a week now. All that runs on that channel is a short piece on why there's nothing on the channel. I just read that CBS revenues was 3.7 BILLION DOLLARS and they were up 11%. The damn pigs want more and more but yet WE'RE GETING SCREWED! We're still paying top dollar for measly basic cable and we're not even getting that here in the Detroit area. Why are we being punished because the two companies are bickering? SHAME ON CBS for sticking it to the little guy who's paying out the ass for basic cable. They are making BILLIONS and we're still having to pay the full price even though we're missing some channels. CBS HEADQUARTERS addres is as follows... 51 W. 52nd Street, New York, NY. 10019-6188
Please feel free to rip them a new one. They make more than enough money but yet like most greed mongers.. they want more. Tell them how you feel and let it be known that you aren't going to watch anything on CBS ever again unless they resolve this quickly and quit trying to gouge the cable companies. It's no wonder our fees keep going higher and higher! There was a time when we used to be able to watch TV and all we paid was the electric company. Now you can't even watch regular TV without some kind of cable because they shut off Analog and made it so you HAVE to submit to the all mighty cable system.

August 06 2013 at 10:28 PM Report abuse +2 rate up rate down Reply

So many concentrate on the fed printing phony money to support a failing economy and what Wall Street is doing, also a false blip. Maybe people should be paying more attention to the metals markets such as the various steels and brass. The sales of metals in the US has been falling for months and do anyone think what that really means. Lower metal purchasing means lower production of durable goods. Washers, driers, cars, buildings and the such means a slower economy comming over the hill. And if you really look at the job market you have to factor in the baby boomers, which the government reports refuse to do. 10,000 boomers hit 65 EVERY DAY. If just a third of them retire that means that 90,000 jobs a month are just maintaining the status quo, not creating new jobs. And if half retire, 150,000 just to maintain the job level, good for those that get the job but it does not expand the economy because those that get a job now have to pay for those that just retired and start collecting money they paid in for up to 40 years. And from what I have seen of most new hires, it take about 2 newbies to equal 1 boomer.

August 06 2013 at 10:00 PM Report abuse +5 rate up rate down Reply

Based on last week Jobs report, 160K new jobs most of were part time jobs the fed isn't going to stop buying bonds anytime soon.

August 06 2013 at 9:33 PM Report abuse +2 rate up rate down Reply

Is this Obama's fault?

August 06 2013 at 8:53 PM Report abuse rate up rate down Reply

AOL. You seem to have elected to delete my comment a few minutes ago. I guess it time to go to gmail and save some money.

August 06 2013 at 5:58 PM Report abuse +7 rate up rate down Reply
Robert Stewart

Stimulus Pullback Fears you say, I say "reality has set in". there was no stimulus just a redistribution of taxpayers money to those who did not earn or deserve it.

August 06 2013 at 5:50 PM Report abuse +8 rate up rate down Reply