Energy stocks including Chevron, Halliburton and Schlumberger led US stocks broadly lower on Tuesday after the White House vowed to appeal a judge's decision to block the six-month moratorium on new deepwater drilling projects.
The Dow Jones Industrial Average fell 148.89 points (1.43%) to 10,293.52, its biggest one-day drop since June 4. Alcoa was the measure's worst performer, with a drop of 43 cents (3.7%) to $11.29. Caterpillar was also weak, with a decline of $1.96 (3%) to $64.11, and Home Depot fell 82 cents (2.6%) to $30.61, hurt by an unexpected drop in existing-home sales.
Chevron tumbled $1.72 (2.3%) to $74, and Exxon Mobil slipped $1.19 (1.9%) to $61.94, as the energy sector slumped on expectations of a legal wrangling between the industry and the Obama administration over the deepwater drilling moratorium. A federal judge in Louisiana ruled against the ban, but the White House responded by saying it would immediately appeal the injunction.
The Nasdaq Composite dropped 27.29 (1.19%) to 2,261.80. The Standard & Poor's 500 fell 17.89 (1.61%) to 1,095.31. All of the S&P 500's sectors ended the session in the red, led by energy. Among the sector's decliners, Halliburton dropped $1.06 (3.9%) to $25.99, and Schlumberger slid $2.07 (3.4%) to $58.26.
Walgreen tumbled $1.97 (6.5%) to $28.17. The company's fiscal third-quarter earnings fell 11%, hurt by the elimination of a tax benefit due to the health-care overhaul, costs from its acquisition of Duane Reade and weakened consumer spending. The profit fell short of analysts' expectations, hurt by a slowdown in generic-drug introductions and a milder flu season.
Jefferies jumped $1.30 (5.7%) to $24.17. The company's fiscal second-quarter profit topped analysts' estimates as it continued to see strong performance from its investment-banking arm, which reported record quarterly revenue. Executive Committee Chairman Brian Friedman said the investment bank's mergers-and-acquisition and strategic-advisory business has "continued to pick up."
Carnival declined $1.55 (4.5%) to $33.19. The cruise-line operator projected third-quarter earnings below analysts' estimates, adding that unfavourable changes in currency exchange rates have hurt earnings while higher fuel costs are also having an impact.
Airline stocks fell as structural cracks discovered recently on at least two American Airlines Boeing 767 jetliners, including one jet that air-safety regulators believe could easily have lost an engine, are prompting concerns that some of the problems may turn out to be more widespread. AMR Corp. dropped 32 cents (3.9%) to $7.92, while Delta Air Lines slid 82 cents (6.1%) to $12.67, Continental Airlines slipped $1.13 (4.7%) to $23.18, and UAL Corp. declined $1.14 (4.9%) to $22.10.
Apple rose $3.68 (1.4%) to $273.85. The company said it sold its three millionth iPad on Monday, 80 days after the tablet computer's introduction in the US, giving further insight into how the device will boost current-quarter results for the tech giant.
For Australian ADRs listed on the NYSE, BHP Billiton fell $1.25 (1.8%) to US$68.16, Rio Tinto Plc weakened 82 cents (1.62%) to US$49.89, ResMed dropped 37 cents (0.58%) to US$63.28, Telstra Corporation shed 58 cents (3.96%) to US$14.07, Telecom Corporation of NZ lost 4 cents (0.59%) to US$6.69 and Westpac dipped $3.09 (2.98%) to US$100.62.
At 7:45 AM (AEST), the 10-year Treasury note yield was 3.17% and the five year yield was 1.96%.
European shares declined on Tuesday, ending a nine-session winning streak, with concerns about the exposure of French banks to Greece and other troubled euro-zone nations weighing on a day the UK took action to get its own budget deficit under control.
The Stoxx Europe 600 index lost 0.4% to 257.14, after closing on Monday at its highest level since May 3.
BNP Paribas shares fell 1.9% in the sector after Fitch downgraded its rating on the lender by one notch to AA-. The ratings firm said it made the move due to structural issues related to the bank's business mix, which relies heavily on corporate and investment banking. Fitch also cited asset-quality deterioration in 2009 for the downgrade.
Credit Agricole shares dropped 4.7% after it said that its Greek unit won't return to profit until 2012, a year later than it provisionally forecast, due to rising loan losses.
Greek banks were trading lower across the board, with Alpha Bank down 4.6% and EFG Eurobank Ergasias losing 4.1%.
Among the major regional equity markets, the French CAC-40 index dropped 0.8% to 3,705.32 and German DAX index declined 0.4% to 6,269.04.
The UK FTSE 100 index fell 1% to 5,246.98 but moved off early lows after UK Chancellor of the Exchequer George Osborne announced spending cuts and tax increases that will total GBP40bn a year by 2015. The budget will eliminate the country's structural deficit by the end of the current parliament, Osborne said.
BP shares lost 4.4% bringing losses since April 19, the day before an explosion on the Deepwater Horizon rig in the Gulf of Mexico triggered a massive oil spill, to 48%.
Oil and gas companies were also weak in Europe, with Norsk Hydro shares down 10% as they started to trade without the right to participate in the firm's discounted share issue.
On the FTSE 100, Rio Tinto slid 45.00 pence (1.29%) to 3,438.16 pence and BHP Billiton slipped 43.50 pence (2.14%) to 1,983.00 pence.
Asian shares ended mostly lower as investors took a breather amid doubts over the pace at which the yuan could appreciate and a lack of excitement on Wall Street after China's decision.
Japan's Nikkei Stock Average fell 1.2%, China's Shanghai Composite climbed 0.1% and Hong Kong's Hang Seng Index lost 0.5% after rising in the previous nine sessions.
New Zealand shares ended lower, weighed down by two large sales of Ryman Healthcare Ltd. shares at a discount prior to the market's opening. The NZX-50 index closed down 0.5%, or 14.05 points lower, at 3,054.19 points.
Base metals on the London Metal Exchange ended mixed, paring early losses as the euro bounced from its lows and shorts were forced to cover their positions. Aluminium rose $8 (0.38%) to $1,958 while copper firmed $55 (0.84%) to $6,605 and nickel added $160 (0.82%) to $19,790. Zinc strengthened $25 (1.41%) to $1,795 and lead gained $20 (1.11%) to $1,820. Comex copper was last quoted at 296.30 US cents per pound.
Gold futures ended flat, taking a breather from a day of volatile trading among most asset classes caused by China's latest currency move. Spot gold was last quoted at $1,239.00. Comex gold futures climbed $0.10 (0.01%) to $1,240.80. Spot silver was last quoted at $18.78.
Oil declined as morning releases of US economic data came in weaker than expected. West Texas Intermediate was last quoted at US$77.21 per barrel.
At 07:45 a.m. (AET) the US dollar was quoted at 0.8155 euros, 90.50 yen, 1.147 AUD and 67.54 pence.