Sam Collins

Should Investors Be Worried?

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Both international and domestic stocks were hit hard yesterday following a downgrade of foreign countries by bond-rating agencies. Greece was cut to BBB-plus from a A-minus by Fitch, and scores of Dubai-government-controlled companies were downgraded by Moody's. 

Even the United States and Britain were under the microscope as Moody's commented that both countries must do something about their public debt or risk losing their AAA rating.

The U.S. dollar index was up 0.6% yesterday, mostly due to gaining on the euro, which traded at $1.4704, down from $1.4813 on Monday. And, as usual, when the dollar rallies, futures fall, so a decline in the Reuters/Jefferies CRB Index of 0.8% was expected.

The exception to the broad decline in futures was natural gas, which gained 14.3 cents to $5.114 per million British thermal units (btu).

Dow member 3M (MMM) said it expects adjusted earnings for fiscal 2009 to be below the prior forecast of $4.57, and more in the order of $4.50 a share. The company said it expects to earn between $4.86 and $5 next year. MMM fell 80 cents to $77.11. 

At the close, the Dow Jones Industrial Average (DJI) fell 104 points to $10,285, the S&P 500 (SPX) lost 11 points to 1,092, and the Nasdaq (NASD) was down 17 points to 2,173.

The NYSE traded 1.2 billion shares with decliners ahead by more than 2-to-1. On the Nasdaq, 611 million shares changed hands with decliners ahead by 9-to-4.

Crude oil for January delivery was lower by $1.31, closing at $72.62 a barrel. The Energy Select Sector SPDR (XLE) fell 95 cents to $54.82, conclusively breaking its 50-day moving average and likely heading to the next support at around $52. 

Gold also fell as a reaction to the dollar rally. The February contract fell $20.60 to $1,143.40 an ounce. The PHLX Gold/Silver Sector Index (XAU) fell $6.86 to $172.11. Its next support is the intermediate trendline at $160.