Stocks Fall on ECB Disappointment

Published on Thursday, 02 August 2012 18:40 Written by Christopher Lynn

New York, August 2^nd (TradersHuddle.com) – Stocks fell for the fourth consecutive session after ECB President Mario Draghi failed to meet heightened expectations over concrete new measures to tackle the debt crisis in the region. Market woes continued following the disappointment from central banks, and as now participants shift their focus to July’s jobs report.

The Dow Jones Industrial Average lost 92.18 points, or 0.71%. The S&P 500 index fell 10.14 points, or 0.74%, while the NASDAQ dropped 10.44 points, or 0.36%.

The market started under pressure after futures turned lower following comments from ECB President Mario Draghi, which fell short of the high hopes and expectations for further action to tackle the debt crisis. Europe was the focus during the session amid a flurry of earnings reports, retailers reporting same store sales, and roughly inline weekly jobless claims data.

The Bank of England left its interest rate and asset-buying program unchanged, while the ECB left interest rates at 0.75%. However, it was comments from Mario Draghi, which led to a sharp pullback in the euro and equity markets around the world. The ECB President said that the ECB might undertake outright open market operations, and that the governing council might undertake outright open market operations, confirming his pledge from last week to save the euro, but the lack of specifics and follow through plan was taken by the investment community as disappointing.

European markets ended sharply lower, with banks in Italy and Spain tumbling. Meanwhile, Spanish yields moved above 7%. In, the U.S. stocks muddled through and moved from their lows of the session ahead of the key employment report due out tomorrow. The disappointment from the ECB added to yesterday’s woes, following a Fed reluctant to provide additional stimulus to boost a sluggish economy.

Additional economic data came in the form of June factory orders, which fell 0.5%, inline with consensus. Tomorrow’s jobs report will be key for participants to gauge the state of the economy. Economists expect lackluster job growth of only 100,000 in the month of July.

The trading glitch in the prior session, which sparked volatility in about 140 NYSE-listed stocks continued in focus in the session after Knight Capital Group (NYSE: KCG) was crushed in the session. Shares plunged nearly 63% to $2.58, adding to the sharp decline from the prior session of more than 30%. The market maker said that it would see a pre-tax loss of approximately $440 million. The company's capital base was severely impacted, but Knight said its broker/dealer subsidiaries are in full compliance with their net capital requirements.

Most of the S&P 500 sectors ended well into negative territory, with energy, materials, and healthcare logging the biggest percentage declines. Meanwhile, consumer discretionary logged a gain in the session thanks to performance from select retailers, which reported positive same store sales figures for the month of July.

Gap (NYSE: GPS) surged to the top of the sector, with shares jumping 12.75% to $33.17. The stock posted a new 52-week high after it said July comparable same-store sales were better than expected and it expects second quarter results above consensus. Macy’s (NYSE: M) rallied 3.8% to $36.40 after its sales in July were also above expectations.

Other retailers posting better same-store sales included Target (NYSE: TGT) and TJX Companies (NYSE: TJX). Target gained 2.2%, while TJX rallied 2.6%. But, not all was positive in the retail world. Abercrombie & Fitch (NYSE: ANF) plunged 14.6% to $29.06, posting a new 52-week low of $28.64, after warning of lower results in the current quarter and full year, as its seeing sharp sales drop in Europe and single digit declines in the U.S.

Also in the consumer space, Kellogg (NYSE: K), the cereal maker, jumped 3.4% to $49.44 after beating on both the bottom and top lines and reaffirming its full year guidance. Kellogg earned $0.89 per share, $0.05 better than consensus. Meanwhile, General Motors (NYSE: GM) lost 2.6% to $29.06 after its quarterly results showed a dip on profit on revenue that fell below expectations. GM earned $0.90 per share, excluding non-recurring items, $0.11 better than consensus.

Energy received the pressure from lower crude oil prices and poor performance from coal and natural gas related names. It was Tesoro Corp. (NYSE: TSO), which was the notable mover in the sector after it shares rallied 14.3% to $31.79, posting the biggest percentage gain in the S&P 500 index. The stock jumped after the crude oil refiner’s quarterly results beat consensus and it announced a new $500 million share repurchase program.

Chevron (NYSE: CVX) fell more than 1% in the session on news that a Brazilian court issued an order for the company to suspend its operations in Brazil in an effort by prosecutors to get Chevron and Transocean (NYSE: RIG) to pay as much as $20 billion for the spill at Frade off the Brazilian coast. Shares of Transocean lost 1.3%.

In tech land, First Solar (NASDAQ: FSLR) was the top performer once again, as the struggling solar company surged 21% to $17.93 after its results handily beat earnings and revenue estimates. The stock was upgraded to Outperform at Robert W. Baird; to a Buy at Cantor Fitzgerald; and to a Hold at ThinkEquity.

Apple (NASDAQ: AAPL) was able to avoid the selloff, by edging 0.16% higher to $607.79 after a research report showed that Apple garnered a 68.2% of the worldwide tablet market. According to the report, strong Apple shipments drove robust tablet market growth in second quarter. Also, the stock has been trading in anticipation of the iPhone 5 and a potential release of an iPad mini. While, the Apple versus Samsung trial in California was scheduled to continue tomorrow.

Elsewhere, Facebook (NASDAQ: FB) continued to fight for the most hated stock in the Street. Shares tumbled once again 4% to $20.04 after logging a new record low of $19.82. Concerns over the growth and its advertising model came into question following company fillings that revealed that Facebook has 83 million, or more fake users registered worldwide, 8.7% of its 955 million active users. In the filling, Facebook classified the accounts as duplicate, user misclassified, and undesirable accounts.