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U.S. stocks dive on reports of New York City aircraft crash

Mark Cotton / MarketWatch | October 11 2006

NEW YORK (MarketWatch) -- U.S. stocks fell to their lows for the session Wednesday after news reports that a small aircraft had crashed into a New York city building.

Stocks had already been under pressures after the minutes of the last Federal Reserve meeting on interest rates made clear that inflation remained a serious concern for central bank officials, dashing hopes among some investors for an early cut in interest rates.

The Dow Jones Industrial Average (^DJI - News) fell as much as 73 points to a session low of 11,794 on news of the crash. The index was last down 50 points at 11,817.

Gains for General Motors Corp. (NYSE:GM - News) , Intel Corp. (NASDAQ:INTC - News) and AT&T (NYSE:T - News) helped offset a 5.3% drop in shares of Alcoa Inc. (NYSE:AA - News)

The Nasdaq Composite Index (NASDAQ:^IXIC - News) was down 12 points at 2,303 while the S&P 500 Index was off 6 points at 1,347.

"Reports that a helicopter may have hit a New York city building sent us lower,' said James Park, managing director at Rodman & Renshaw.

Media reports indicated that a small aircraft crashed into a building on Manhattan's Upper East Side. Television news reports showed smoke rising from a building at that location. There are no initial indications that the crash was terror-related.

Earlier, the minutes of the Federal Open Market Committee's September meeting indicated clearly that inflation was still very much a concern.

Fed officials still think "the most likely outcome was a reduction in inflation pressures, but the anticipated decline was only gradual and the uncertainties around that forecast were skewed toward higher rather than lower inflation rates," according to the minutes.

Investors also noted that Jeffrey Lacker of the Richmond Fed dissented in favor of a rate hike for a second straight meeting. He said the economy was unlikely to slow enough to bring core inflation down.

"The minutes are more hawkish than expected," said Hugh Johnson, chairman of Johnson Illington Advisors. "They certainly imply that a rate reduction is not on the cards, and may even suggest that there may be additional rate hikes in the future."

The central bank's key short-term interest rate, known as the fed-funds rate, currently stands at 5.25%.

Ahead of the FOMC minutes, stocks managed to trim losses sparked by weaker-than-expected earnings from Alcoa Inc.

We should not "read too much into Alcoa," because "[third-quarter] earnings results will generally be on the positive side, according to Michael Malone, trading analyst at SG Cowen. "As results, trickle in, and as they, in my estimation, exceed expectations, I think that they'll definitely drive the market from higher from here."

On the broader market for equities, decliners outpaced advancers by 20 to 11 on the New York Stock Exchange, and by 9 to 5 on the Nasdaq.

By sector, the broker index (AMEX:^XBD - News) slumped as a profit warning from Legg Mason (NYSE:LM - News) weighed. Read more .

The Dow Jones Internet Index was under some pressure as CNet Networks Inc. (NASDAQ:CNET - News) fell more than 6% after the online media firm announced an executive shake-up, lowered its third-quarter and full-year revenue expectations and disclosed the results of a stock-options backdating investigation.

The hotel sector moved lower, hurt by a nearly 8% slump in shares of Host Hotels. The company reported a third-quarter profit, reversing a year-earlier loss, but the company also trimmed back on some of its expectations and forecast slower growth ahead.

Semiconductor stocks (Philadelphia:^SOXX - News) held onto solid gains, weathering the broader downturn in the market.

Volume was 1.14 billion on the Big Board, and 1.47 billion on the Nasdaq.

On the data front, the federal deficit was trimmed to $248 billion in fiscal 2006, the Treasury Department said Wednesday, a decline of $71 billion from the $319 billion gap recorded in 2005. The fiscal year ended Sept. 30.

Crude-oil futures fell, extending weakness from the previous session as traders weighed an agreement by key oil producers to cut production against a monthly report that offered a lower oil-demand forecast and showed that world production fell in September.

The benchmark November contract was last down 85 cents at $57.67 a barrel. See Futures Movers.

On the bond market, Treasury prices turned lower, sending yields higher after the Fed's The benchmark 10-year note was last down down 6/32 at 100-24/32, with its yield (CBOE:^TNX - News) at 4.78%.

The U.S. dollar turned higher against the euro, and pared losses against the Japanese yen after the FOMC minutes.

The euro was last down 0.2% at $1.2510. Against the Japanese yen, the greenback was flat at 119.73. See Currencies.

Gold futures ended slightly higher, losing the bulk of its strength as weakness in oil prices partially offset concerns over North Korea. The benchmark December contract rose 30 cents to $576.50 an ounce.

Stocks in focus
Shares of Alcoa Inc. fell as much as 6.7% to an 11-month low of $26.39 after the aluminum giant posted late Tuesday third-quarter profit and sales that fell short of analyst expectations because of a steep drop in metals prices, and rising costs.

Legg Mason Inc. (NYSE:LM - News) shares plunged 17% to $87.44 as Wall Street analysts lowered their profit forecasts and stock ratings for the asset manager after it warned that second-quarter net income will be well below consensus estimates. See The Ratings Game.

Also in the financial sector, Bank of America Corp. (NYSE:BAC - News) confirmed its retail brokerage unit will offer customers free online equity trades, effective immediately.

The commercial and retail banking giant said customers who are self-directed investors with combined deposit balances of at least $25,000 will be eligible for up to 30 commission-free online stock trades per month.

The news weighed heavily on shares of online trading firms, with TD Ameritrade (NASDAQ:AMTD - News) and E-Trade (NYSE:ET - News) both moving sharply lower.

Shares of Genentech Inc. (NYSE:DNA - News) fell 1.8% to $84.07. The company posted a 58% rise in third-quarter net earnings, helped by better-than-expected sales of Lucentis, its recently launched treatment for the leading cause of blindness in the elderly. However, sales of its other drugs, Avastin, Herceptin and Rituxan failed to impress.

In other news, Visa said Wednesday it's positioning itself for what will likely be a major initial public offering as the credit-card brand echoes the move taken earlier this year by rival MasterCard Inc. (NYSE:MA - News) . '


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