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Dow sinks 220 points as sell-off accelerates

Posted at 1:55 PM, Oct 23, 2012
and last updated 2012-10-23 13:55:31-04

By Emily Jane Fox, CNNMoney

NEW YORK (CNNMoney) – A sell-off on Wall Street gained momentum Tuesday, with the Dow Jones industrial average dropping 220 points after three Dow components issued disappointing earnings and forecasts.

The S&P 500 and the Nasdaq shed between 0.9% and 1.4%. Even with the sharp declines, all three indexes are still up between 7% and 14% this year.

Three major U.S. industrial companies missed earnings expectations, igniting worries that the global economy might be on shakier ground than previously suspected.

“Our trading partners have bigger economic issues than even we have, and that’s why we saw September drop off significantly for companies” said Tim Ghriskey, chief investment officer at Solaris Asset Management.

“There’s continuing uncertainty about the economic health of Europe and China,” he said, noting that the highly contested presidential election and looming fiscal cliff are just adding to worries about the U.S. economy.

Shares of chemicals maker DuPont fell nearly 9% after the Dow component reported weaker-than-expected quarterly earnings and announced plans to cut 1,500 jobs worldwide. United Technologies, which provides technology for aerospace and building industries and a Dow stock, reported better-than-expected earnings but missed on revenue and lowered its revenue forecast for next year.

3M, which makes scotch tapes and Post-it notes and is considered an economic bellwether, reported earnings that were in line with forecasts, but the company missed revenue estimates and pulled back on its guidance.

UPS, another global economic bellwether, reported results that were roughly in line with expectations.

After the bell, Facebook and Netflix will release their reports.

Analysts at S&P Capital IQ predict third-quarter earnings for companies in the S&P 500 will grow by just 0.04% overall this quarter, the worst since the third quarter of 2009.

In addition to the earnings news, Apple is expected to unveil its iPad mini at an event in California.

Stocks were already under pressure ahead of the lackluster earnings, as news surrounding Spain unnerved investors.

The euro fell below the key $1.30 level after ratings agency Moody’s downgraded five of Spain’s regional governments, including Catalonia — the largest. And the gross domestic product for Spain, which has been mired in recession for months, fell by 0.4% in the third quarter from the second quarter, according to data released Tuesday from the Bank of Spain.

European stocks closed lower. Britain’s FTSE 100 fell 1.4%, the DAX in Germany lost 2.1% and France’s CAC 40 declined 2.2%.

Asian markets closed mixed. The Shanghai Composite slid 0.6% and Japan’s Nikkei was little changed. The Hong Kong exchange was closed for a holiday.

Companies: Yahoo shares rose almost 6% after the company’s third-quarter earnings handily beat estimates late Monday.

Xerox reported a 3% drop in revenue for the third quarter, falling below analyst expectations. Shares of the copying company sank more than 7%.

Shares of Harley-Davidson Inc surged more than 6% after the motorcycle maker announced that new bikes are due to come out by 2015.

Target said Tuesday that it sold its consumer credit card portfolio to TD Bank for $5.9 billion.

Shares of Monster Beverage tumbled nearly 11% Tuesday, after closing down 14% in the prior day’s session. The Food and Drug Administration confirmed Monday that it had received five reports claiming that consuming Monster Beverage products resulted in death.

Currencies and commodities: The dollar rose against the British pound, but fell versus the Japanese yen.

Oil for December delivery sank $2.34 to $86.29 a barrel – its lowest level since July.

Gold futures for December delivery fell $13.70 to $1,712.60 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury edged higher, pushing the yield down to 1.76% from 1.80% late Monday.