Dow dragged down by IBM and Goldman

MGN ONLINE
Thursday, October 17, 2013 - 8:52am

With the fiscal crisis in Washington temporarily averted, investors were taking their cues Thursday from the latest corporate results. And they weren't good.

The Dow Jones industrial average fell nearly 100 points, or 0.6%, in early trading, dragged down by shares of IBM and Goldman Sachs. Both stocks were pummeled following quarterly reports that disappointed investors. UnitedHealth, another Dow component, was also down due to a tepid forecast.

IBM and Goldman are the second and third highest weighted components in the Dow, which is weighted by stock price as opposed to market value like the S&P 500. UnitedHealth has the seventh biggest weighting. This means moves in these higher-priced stocks have an outsized impact on the Dow.

Losses in the broader market were more modest. The S&P 500 and the Nasdaq were both down about 0.2%.

Stocks surged more than 1% Wednesday following news that Congress had reached a deal to reopen the federal government and avert a potentially catastrophic default. But the initial euphoria faded around the world Thursday and investors were beginning to wonder what happens when the government bumps up against the debt ceiling again in February.

The dollar was weaker against other major world currencies, sinking as much as 0.7% against the euro and the pound. European stocks were lower in mid-afternoon trading while Asian markets finished mixed.

China, the United States' biggest foreign creditor, welcomed the resolution of the debt ceiling crisis. But credit rating agency Dagong, which has close ties to the Chinese government, cut its rating on U.S. debt, saying the country was only able to remain solvent by raising new debts.

Investors were also concerned about the economic toll of the impasse, which shut down large parts of the government for 16 days. The shutdown comes with a $24 billion price tag, according to Standard & Poor's.

About 70,000 federal workers filed for unemployment benefits during the first week of October, the Labor Department reported Thursday. The shutdown, which started Oct. 1, put thousands of federal employees temporarily out of work and without a paycheck.

In corporate news, IBM shares sank 6% after the tech giant reported quarterly sales that fell well short of expectations. Shares of eBay fell 5% after the company offered weak guidance.

Shares of Goldman Sachs fell after the firm reported a year-over-year revenue decline. At the same time, Goldman's earnings per share topped forecasts and the company hiked its dividend by a nickel to 55 cents. UnitedHealth was down nearly 4% following its results.

Dow component Verizon jumped after the company reported a double-digit profit increase for the quarter thanks to strong gains in wireless subscribers.

Google is set to report its latest quarterly results following the closing bell.

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