Cummins (CMI) Warning Weighs Heavily on Stocks; Investors Hold Out Hope for Clues from FOMC Minutes

July 10, 2012 3:59 PM EDT Send to a Friend
US stocks are now well into negative territory Tuesday afternoon as investors may have gotten one too many notable profit warnings over the last couple sessions. After gapping up more than 0.6 percent at the open, the S&P 500 is now down about 1 percent to just under 1,339.

Warnings from AMD (NYSE: AMD) Monday evening and Applied Materials (Nasdaq: AMAT) this morning weighed on bulls, but were not enough to push equities substantially lower. Traders didn't really begin hitting the sell button until around 1:20pm ET, when Cummins (NYSE: CMI) said it is now looking for FY12 sales to be inline with 2011 levels, down from a previous forecast for 10 percent growth.

While Cummins shares immediately fell more than 4 percent, the pain became more widespread as investors started selling shares of Cummins peer and Dow component Caterpillar (NYSE: CAT). Cat shares are now down about 4.3 percent; Cummins' stock has settled down more than 10 percent.

Traders are also taking note of sharp and across-the-board declines in recent momentum stocks. Though many of these names are marginal in the overall scheme of the stock market, a shift away from these growth plays sometimes suggests risk aversion among investors.

Downside also now seems to be hitting several important sectors. The Financial Select Sector SPDR ETF (NYSE: XLF) is down more than 1.1 percent and the Energy Select Sector SPDR ETF (NYSE: XLE) is down about 2 percent. The SPDR Gold Trust ETF (NYSE: GLD) is down 1.3 percent at last check.

Wall Street will get some insight into the Fed's latest indications on Wednesday when the FOMC releases the minutes from its meeting on June 19th. Anything short of hints at further quantitative easing will likely be viewed dismally... certainly not the ideal way to begin the second-quarter earnings season.


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