U.S. equities sold off today amid concern about corporate earnings and stock valuations as several S&P 500 companies quarterly reports disappointed.
The Dow Jones industrial average closed down 231.77, or 2.5%, at 9,033.66; the S&P 500 fell 30.35, or 3.08%, ending at 955.05; and the Nasdaq composite closed down 73.35, or 4.14%, at 1,696.68. All numbers are preliminary.
The tech sector was hurt by Texas Instruments Inc., which missed profit estimates in the third quarter. As world demand began to slow, Freeport-McMoRan Copper & Gold Inc. also came short of the consensus forecast, while chemical group E.I. du Pont de Nemours & Co. warned of slower sales.
Caterpillar Inc. shares fell on a dim outlook for 2009, due to a slowing global economy. About one-fourth of S&P 500 companies are reporting earnings this week, with the market expecting few good surprises.
However, efforts by U.S. and European governments to thaw the credit freeze are starting to yield some results. Short-term borrowing rates in London fell sharply today, trading closer to the federal funds rate.
The Federal Reserve today announced it has created the Money Market Investor Funding Facility, to buy as much as $540 billion of certificates of deposit and commercial paper from up to 50 financial institutions.
There was an immediate impact on the credit markets from the Feds announcement as gauged by the two-year swap spread, which narrowed sharply, said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co.
The sense is that the new facility will reduce strains on bank capital, chiefly by reducing the tapping of credit lines resulting from the contraction of the commercial paper market, and by helping to support demand for bank debt, including certificates of deposits, Mr. Crescenzi added.