Wall Street falls on Draghi comments, headed for 4th straight drop

MARKETS-USA-STOCKS:Wall Street falls on Draghi comments, headed for 4th straight drop

new York  August 2, 2012, 20:23 IST

new York  08 02, 2012, 20:30 IST

 

U.S. stocks fell on Thursday, putting the S&P on track for its fourth straight decline after comments from European Central Bank President Mario Draghi disappointed investors.

After the ECB kept the main interest rate at 0.75 percent, Draghi said a mechanism will be drawn up the coming weeks to make outright purchases to stabilize stressed euro zone borrowing costs, within the mandate of the governing council.

After last week's pledge by Draghi to "do whatever it takes" to save the euro, expectations for strong action had been raised considerably, putting intense pressure on the ECB president.

 

"Draghi didn't say anything that excited us, and he set us up like a poker room full of suckers. Investors are angry, traders are angry," said Todd Schoenberger, managing principal at the BlackBay Group in New York.

"Draghi said he would do whatever it takes, and that may be the case, but we were all expecting a shock and awe moment."

European stocks reversed course and turned negative and yields on Italian and Spanish bonds rose after the comments, with the FTSEurofirst 300 index down 0.9 percent.

Knight Capital Group Inc shares plunged 43.8 percent to $3.90 after hitting an all-time low of $3.21, a day after a computer glitch at the market maker triggered a spike in volatility shortly after the open. The company said on Thursday an erroneous trading position wiped out $440 million of its capital and will force the firm to raise money.

The Dow Jones industrial average dropped 54.94 points, or 0.42 percent, to 12,916.12. The Standard & Poor's 500 Index lost 4.78 points, or 0.35 percent, to 1,370.36. The Nasdaq Composite Index gained 6.62 points, or 0.23 percent, to 2,926.83.

Economic data showed the number of Americans filing new claims for jobless benefits rose less than expected last week, but the data continues to be influenced by distortions from seasonal auto shutdowns.

The data comes on the heels of a stronger-than-expected ADP National Employment Report and before Friday's non-farm payrolls report for July.

New orders for U.S. factory goods unexpectedly fell in June, a fresh sign that the slowdown in the country's manufacturing sector likely would stretch into the second half of the year.

General Motors Co posted a smaller-than-expected loss in Europe that helped the No. 1 U.S. automaker post a better-than-expected second-quarter profit. Shares slipped 0.7 percent to $19.52.

According to Thomson Reuters data, of the 352 companies in the S&P 500 that have reported earnings through Wednesday morning, 66.2 percent have beaten analysts' expectations. Over the past four quarters, 68 percent of companies beat estimates.

In a bright spot, discounts and warm weather drew U.S. shoppers to malls in July, helping many retailers report healthy sales gains in what is typically a clearance month ahead of the back-to-school season. The S&P retail index gained 0.7 percent.

Gap Inc jumped 9 percent to $31.06 after the clothing retailer posted its July and second-quarter sales, but rival Aeropostale plummeted 28.5 percent to $13.91 after cutting its second-quarter forecast.