Stocks Fell, as Fed Rally Lost Steam

Published on Monday, 17 September 2012 18:08 Written by Christopher Lynn

New York, September 17^th (TradersHuddle.com) – Stocks fell, snapping a four-session winning streak, as the Fed induced rally lost steam amid weaker than expected manufacturing data in the U.S. and concerns over the Chinese economy following soft home sales. Worries over Spain debt crisis were once again grabbing headlines amid protests over austerity measures, while territorial tensions between China and Japan escalated after Chinese anti-Japan protests. Also keeping investors on edge were the ongoing anti-American protests in the Middle East and growing tensions over Iran’s nuclear program.

The Dow Jones Industrial Average lost 40.27 points, or 0.30%. The S&P 500 index fell 4.58 points, or 0.31%, while the NASDAQ slid 5.28 points, or 0.17%.

The market started with modest losses following last week’s Fed induced rally amid weak overseas action and after Empire State Manufacturing data was weaker than expected. Euro zone jitters were back on amid Spanish protests against austerity measures. Chinese shares slumped after weak home sales and concerns over potential inflation that could limit any additional stimulus from China’s central bank.

Most S&P 500 sectors ended in negative territory, with materials, financials, and energy leading the declines, while consumer staples, healthcare, and technology gained. The material sector slumped more than 1.5%, amid concerns for Chinese demand and after JPMorgan downgraded several steelmakers to a Neutral rating. Cliffs Natural Resources (NYSE: CLF) plunged 7% to $42.36, posting the biggest decline in the S&P 500, while United States Steel (NYSE: X) tumbled 4.7%. Another steelmaker involved in the downgrade was AK Steel (NYSE: AKS), which shares dropped 5.8%.

Also in the sector, Alcoa (NYSE: AA), the aluminum producer, slumped 2.6% to $9.58, posting the biggest decline in the Dow Jones Industrial Average.

In the financial sector banks retreated amid profit taking following the sharp rally of the prior sessions and amid reports of a money laundering probe by banking regulators of JPMorgan (NYSE: JPM), which saw its shares fell by 0.91% to $41.19. Rival Bank of America (NYSE: BAC) was the second worst Dow component in the session, as shares lost 2.6% to $9.3, giving back part of its 8% surge last week.

Energy stocks were also under pressure amid a drop in crude oil prices amid rumors of an erroneous trade and speculation the U.S. was setting up a release of oil from its Strategic Reserve aimed to bring down speculation. Coal stocks were weaker after their red-hot performance this month, with Alpha Natural Resources (NYSE: ANR) tumbling 5.5%, trimming its month to date surge to 36%.

The refiners, which have also been top performers in the sector, fell. Valero Energy (NYSE: VLO) slumped 5% to $32.04, while Marathon Petroleum (NYSE: MPC) tumbled 3.5% to $53.64 after both were downgraded to a Neutral rating at Citigroup.

In tech land, the topic was Apple’s (NASDAQ: AAPL) march towards the $700 mark. The company announced that its new iPhone 5 set a record for the first 24 hours of being available for pre-order, with customers ordering 2 million devices. Apple gained 1.23% to $699.781, its highest close ever, and logged a new all-time high of $699.80 after several firms had bullish commentary following the reports of record sales over the weekend from Apple and from AT&T (NYSE: T).

FBR Capital said that the sales reports suggest upside for its iPhone estimates for third and fourth quarters, while Barclays commented that the iPhone 5 could represent 1/3 of China’s export growth in the fourth quarter of this year. Meanwhile, BMO Capital boosted its target price on the stock to $750 from $680. Meanwhile, shares of AT&T gained 0.91%, as the company announced that it set a new company record for the most iPhones sold in the first weekend of being available for pre-order.

On the flip side, the worst performer in the sector was First Solar (NASDAQ: FSLR), as shares tumbled 5.5%. Rival LDK Solar missed on both the top and bottom lines, while issuing downside revenue guidance for the current quarter and fiscal 2012, highlighting the difficult industry environment.

Elsewhere, Netflix (NASDAQ: NFLX) tumbled more than 5%, logging the second worst performance in the S&P 500 after Macquarie initiated coverage with an Underperform rating.

Facebook (NASDAQ: FB) slumped more than 2% to $21.52, giving back some of its more than 15% rally in the prior week. The stock had its best weekly performance since its IPO week after CEO Mark Zuckerberg gave bullish comments at the Tech Crunch conference regarding the company’s mobile prospects, adding that it’s a good time for employees to double down on the stock.