Stocks indexes slide following gloomy IMF forecast
NEW YORK (AP) -- Stocks slid Tuesday on Wall Street after another weak forecast of global economic growth and poor expectations for corporate earnings.
With an hour of trading to go, the Dow Jones industrial average was down 85 points at 13,498. The Standard & Poor's 500 index was down 10 poitns at 1,445, and the Nasdaq composite index was down 40 at 3,072.
The slide came on the five-year anniversary of record high closes for the Dow and S&P 500. The Dow is now roughly 5 percent below its peak, and the S&P 500 is roughly 8 percent off its peak.
Investors were waiting for Alcoa, the aluminum company, to release its quarterly earnings report after the market closed -- the traditional beginning of what investors call earnings season.
Analysts expect earnings at S&P 500 companies to be down compared with last year, the first decline in almost three years.
Wall Street expects Alcoa itself to break even, but analysts had been predicting profits of 12 cents per share from the aluminum maker as recently as July. Alcoa was up 10 cents at $9.22 in afternoon trading.
Investors were discouraged by an International Monetary Fund report released overnight that said the global economy was weakening and the downturn afflicting developing nations has begun to spread.
The weak forecast came one day after the World Bank cut its estimate for growth in China, the world's second-largest economy, and for developing countries across Asia.
The IMF forecasts that the world economy will expand 3.3 percent this year, down from the estimate of 3.5 percent growth it issued in July. Its forecast for growth in 2013 is 3.6 percent, down from 4.1 percent in April.
Talley Leger, investment strategist at Macro Vision Research, noted that the IMF report came while Greek protests erupted again in Athens over budget-cutting measures and after a downgrade of Cyprus' credit rating on Monday.
"It's all negative headlines today," Leger said. "There's a lot of European fears."
Leger added he wouldn't be selling stocks given that Federal Reserve and other central banks are trying to stimulate economies around the world.
"With markets so firmly supported by central bankers, I don't want to be defensive," he said. "It's a gift" to investors.
Earlier Tuesday, the National Federation of Independent Business reported that business owners became increasingly pessimistic during September because of the weak hiring environment and poor sales.
Nonetheless, the number of owners who expect business conditions to improve in six months gained four percentage points. Those believing it's a good time to expand rose three percentage points.
Among other stocks making big moves, Edwards Lifesciences dropped $19.51 to $87.90 after the company reported revenue that fell well short of analyst forecasts. Sales of its Sapien heart valves were weaker than the company had expected.
Yum Brands, which owns the Taco Bell, Pizza Hut and KFC chains, fell 42 cents to $66.52. The company, which also reports results after the closing bell, has predicted a return to rapid growth in its China operations in the second half of the year.
Stanley Black & Decker fell $1.11 to $73.12 after the tool maker said it would sell its hardware and home-improvement business to Spectrum Brands Holdings for $1.4 billion in cash. Spectrum Brands' stock jumped $4.26 to $45.42. The Wisconsin-based company owns the Rayovac, Remington and Toastmaster brands.
The yield on the 10-year Treasury note fell to 1.72 percent from 1.74 percent late Friday. U.S. government bond trading was closed Monday for the Columbus Day holiday.
European markets also fell. Benchmark indexes fell 0.8 percent in Germany and 0.5 percent Britain. France's stock market index fell 0.7 percent.
(Copyright 2012 by The Associated Press. All Rights Reserved.)