Macro concerns continued to plague markets this morning, as the Dow Jones Industrial Average (INDEX: ^DJI ) lost ground for a third straight day. Today, the bad news came from Germany and France; both released data indicating their manufacturing and services sectors shrank more than expected in July. The announcements came just after Moody's downgraded its outlook for Germany, along with the Netherlands and Luxembourg, to negative. As Dan Veru, chief investment officer at Palisade Capital Management, succinctly stated, "It's far from over." At 12:30 p.m. EDT, the Dow had dropped 1.25% while the S&P 500 (INDEX: ^GSPC ) fell 1.3%.
Earnings season has been the other leading economic storyline, at times buoying markets against global macroeconomic pessimism. This would not be the case today, however. Dow components AT&T (NYSE: T ) and DuPont reported earnings. AT&T announced that profits beat expectations by $0.66, but the company's Q2 revenue of $31.6 billion missed expectations. Wireless strength carried the mobile operator as margins improved, although the company will likely see margins shrink from due to subsidizing Apple's upcoming iPhone 5. Even though AT&T maintained its status as the leading service provider for iPhones, shares sank 2.7%. Chemical producer DuPont reported uninspiring quarterly results, and cut its full-year forecasts, resulting in a 2% decline. After markets close, all eyes will turn to Apple and Netflix for their earnings reports.
No Dow stock suffered as much as Cisco (Nasdaq: CSCO ) today, which plummeted almost 6%. Cisco investors have taken a beating lately; shares have fallen 8.5% over the last four days. The company announced plans to cut 2% of its workforce, or 1,300 jobs, citing global economic concerns and slow corporate spending. This builds on a negative trend started last year, when Cisco terminated 6,500 employees. Adding to the pain, analysts warn that VMware's $1.26 billion acquisition of Nicira could pose a threat to Cisco's networking dominance.
Caterpillar (NYSE: CAT ) had gained over 1% this morning, as investors are hopeful in advance of Caterpillar's earnings announcement tomorrow. Positive Chinese manufacturing news may have motivated the surge, as HSBC said its Chinese manufacturing index rose to its highest level since February. Shares are trading approximately 30% off the industrial company's 52-week highs around $115 in February. By 12:30 p.m., shares had lost their gains and traded at a slight loss.
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