Couple of downbeat forecasts and mortgage worries returning back to spotlight rattle stocks

The US market finished considerably lower today, Tuesday, 10 July, 2007, as a weak financial sector once again haunted by subprime jitters pushed US stocks down. Higher crude prices and a downbeat forecast from Home-Depot, D R Horton and Sears Holding worsened investor sentiment further.

Nine out of 10 sectors closed sharply lower today. Speech by Federal Reserve Chairman Ben Bernanke failed to shed light on the central bank's plans for interest rates and just sounded like another academic speech. But the market did register substantial loss going into close.

The Dow Jones Industrials plunged by a huge 148.27 points to close at 13,501.7. The tech-heavy Nasdaq lost 30.86 points to close at 2,639.16 and S&P 500 too closed considerably lower by 21.73 points at 1,510.12.

Twenty-six out of 30 Dow stocks retreated into red going into close. Caterpillar, GM, Boeing and IBM remained as the only four winners. JP-Morgan, Verizon and American Express were the main Dow laggards.

The mortgage problem slammed financial stocks hard. S&P said it put $12 billion worth of subprime mortgage-backed securities on CreditWatch negative. At the market close, Moody's actually did downgrade 399 mortgage bonds for the same reason.

Bernanke today stated that inflation expectations remain "imperfectly anchored" as the Fed still sees the potential for inflation despite the drop in the core PCE price index below 2%.

D R Horton, Sears and Home-Depot - all issue downbeat forecast guidance

Stocks stumbled out of the gate as earnings season started on a negative note with Alcoa disappointing investors after yesterday’s close. The indices extended their reach into the red as all 10 economic sectors remained negative.

For the second time this year Home Depot provided disappointing profit guidance, citing weak housing market conditions. Also weighing on retailers was Sears Holdings which warned that Q2 earnings will miss forecasts due largely to lower sales of home appliances.

Energy, benefiting from the uptick in oil, acted as at least one source of support. DR Horton, reporting a 40% drop in new home orders, also warned of a quarterly miss.

Sellers remained in complete control of today's action, stopping any attempt by market bulls to regain any momentum whatsoever. Stocks retraced session lows heading into the final hour of trading, paced by declines of more than 1% on the S&P 500 and Nasdaq.

Crude prices on the verge of touching $73/bbl

Crude oil futures increased today and crossed $73/barrel during intra-day trading on speculation that the US output of the fuel will slow because of unexpected refinery shutdowns. Crude prices were pulled higher by rising gasoline prices. Prices also increased on yesterday’s IEA’s revised demand outlook figures on world oil demand.

Crude-oil futures for light sweet crude for August delivery closed at $72.81/barrel (higher by $0.62/barrel or 0.9%) on the New York Mercantile Exchange. Prices are down 1.1% from a year ago.

Trading volumes showed 1.6 billion shares exchanging hands on the New York Stock Exchange and 2.2 billion trading on the Nasdaq. Declining issues topped decliners by 25 to 7 on the NYSE and by 22 to 7 on Nasdaq.

For tomorrow, the Energy Dept.'s weekly oil report at 10:30 ET will garner attention. On the earnings front, Genentech and Yum! Brands are the most notable companies expected to report their results.