Stocks fall as Buffett deal brings modest comfort
By SARA LEPRO and TIM PARADIS
NEW YORK (AP) - Investors worried about the economic recovery
drew only modest comfort from billionaire investor Warren Buffett's
decision to buy one of the nation's largest railroads.
Buffett's Berkshire Hathaway said Tuesday it is paying $100 a
share for Burlington Northern Santa Fe in a deal valuing the
railroad at $34 billion.
Investors are on edge about unemployment and the stability of
major financial firms in Europe.
NYSE:F Updated: 16:00 ET 8.81 +0.08 |
NYSE:JNJ Updated: 16:00 ET 63.18 +0.49 |
Health care products maker Johnson & Johnson said it would cut
up to 7 percent of its global work force and streamline its
business structure to save up to $900 million next year.
In Europe, investors were unnerved by further efforts to
restructure two of the U.K.'s largest banks. Lloyds said it was
looking to raise about $34 billion through a share issuance, while
the Royal Bank of Scotland got a $41 billion infusion from the
government.
A rise in factory orders wasn't enough to boost sentiment. The
Commerce Department said orders to U.S. factories rebounded in
September after dropping in August. Orders rose 0.9 percent in
September amid increases in orders for autos, heavy machinery and
military aircraft rose. Analysts had expected an increase of 0.8
percent, according to Thomson Reuters.
Investors around the globe have been uneasy in recent weeks,
wary about whether the economic recovery can maintain the same pace
once government stimulus measures are removed. That uncertainty has
led to wild swings in the market. The Dow Jones industrial average
has risen or fallen more than 100 points in six of the last eight
trading days, the most volatility since March.
Thomas Ruggie, president of Ruggie Wealth Management in Tavares,
Fla., said investors are worried that the stock market has been
getting overheated so they're not moving into stocks even when
there is upbeat news like merger activity.
``People are still scared,'' he said. ``People are treading
very, very lightly.''
In late morning trading, the Dow fell 45.04, or 0.5 percent, to
9,744.40. The broader Standard & Poor's 500 index fell 4.08, or 0.4
percent, to 1,038.80. The Nasdaq composite index fell 10.91, or 0.5
percent, to 2,038.29.
Analysts expect trading to be choppy throughout the week, as the
market readies for a frenzy of series of economic reports that
culminates Friday with the government's employment report for
October.
Stocks vacillated between gains and losses Monday after a
stronger-than-expected reading on manufacturing activity and a
surprise profit from Ford Motor Co. All the major indexes ended up
with gains of less than 1 percent.
Investors are watching the Federal Reserve, which on Tuesday
began a two-day policy meeting on interest rates. Though the
central bank isn't expected to take any action on interest rates,
investors will be watching for what the Fed has to say about the
state of the economy when it issues a statement Wednesday at the
conclusion of the meeting. The Fed's benchmark interest rate
currently stands at a record low of essentially zero.
Bond prices were mixed. The yield on the benchmark 10-year
Treasury note, which moves opposite its price, rose to 3.44 percent
from 3.42 percent late Monday.
The dollar rose against other major currencies.
Crude oil fell 20 cents to $77.93 a barrel on the New York
Mercantile Exchange, while gold rose.
Shares of Burlington Northern jumped $21.39, or 28.1 percent, to
$97.46 after Buffett's move.
Johnson & Johnson slipped 21 cents, or 0.4 percent, to $59.28.
Royal Bank of Scotland fell 63 cents, or 5 percent, to $12.02,
while Lloyds Banking Group PLC rose 28 cents, or 5.2 percent, to
$5.72.
The Russell 2000 index of smaller companies fell 1.75, or 0.3
percent, to 560.65.
Four stocks fell for every three that rose on the New York Stock
Exchange, where volume came to 370.9 million shares compared with
480.5 million traded at the same point Monday.
Overseas, Britain's FTSE 100 fell 1.5 percent, Germany's DAX
index fell 1.1 percent, and France's CAC-40 dropped 1.4 percent.
Markets in Japan were closed for a holiday.
11/03/09 11:23
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