Stocks slide, and investors wait for earnings

Associated Press Modified: October 9, 2012 at 3:30 pm •  Published: October 9, 2012
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NEW YORK (AP) — Stocks slumped Tuesday on Wall Street after the International Monetary Fund predicted weaker world economic growth and as investors waited for what they expected to be lower corporate earnings.

The Dow Jones industrial average declined 110.12 points, or 0.8 percent, to 13,473.53. The Standard & Poor's 500 index dropped 14.40 points, a hair under 1 percent, to 1,441.48.

The Nasdaq composite index lost 47.33 points, or 1.5 percent, to 3,065.02.

The slide came on the five-year anniversary of record high closes for the Dow and S&P 500. The Dow is about 700 points off its all-time high, 14,164.53. It would take a 5 percent rally from here to reach the record.

Investors were discouraged by an International Monetary Fund report released overnight that said the global economy was weakening and the downturn afflicting developing nations has begun to spread.

The weak forecast came one day after the World Bank cut its estimate for growth in China, the world's second-largest economy, and for developing countries across Asia.

The IMF forecasts that the world economy will expand 3.3 percent this year, down from the estimate of 3.5 percent growth it issued in July. Its forecast for growth in 2013 is 3.6 percent, down from 4.1 percent in April.

After the market closed, Alcoa, the aluminum company, said it earned 3 cents per share in the most recent quarter after accounting for special charges. Wall Street was expecting break-even.

Alcoa stock ended the regular trading day up a penny at $9.13 and gained an additional 7 cents in the first half-hour after the earnings report. Alcoa is the first of the 30 stocks in the Dow to report earnings.

Overall, analysts expect earnings at S&P 500 companies to be down compared with last year, the first decline in almost three years.

Talley Leger, investment strategist at Macro Vision Research, noted that the IMF report came while Greek protests erupted again in Athens over budget-cutting measures and after a downgrade of Cyprus' credit rating on Monday.

"It's all negative headlines today," Leger said. "There's a lot of European fears."

Leger added he wouldn't be selling stocks given that Federal Reserve and other central banks are trying to stimulate economies around the world. The Fed has committed to buying $40 billion in mortgage bonds per month until the economy heals.

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