With earnings season kicking off today, the International Monetary Fund decided to rain on the market's parade, sending the Dow Jones Industrial Average (^DJI 0.95%) down 110 points, or 0.8%. The IMF cut its growth forecast from 3.5% in 2012 and 3.9% next year to 3.3% and 3.5%, respectively, and called the risks of a slowdown "alarmingly high." The lending institution also said there was a 15% chance of recession in the U.S. next year, a 25% chance in Japan, and over an 80% chance in the eurozone. In its report, the IMF cited the usual suspects, including high unemployment, slowing growth in emerging markets, and government spending cuts.
Intel (INTC 5.41%) and Microsoft (MSFT 0.43%) led the Dow's tumble, falling 2.7% and 1.7%, respectively. Intel hit a new 52-week low as Bernstein Research cut its rating to underperform, saying that recent revenue growth was due more to a price increase than to an increase in unit sales, as PC sales have been weak. The top chipmaker also announced it will lay off 7,100 workers from its McAfee division, evidence that the 2010 acquisition may not be going as planned. Microsoft, meanwhile, seems down on the IMF's warning and nervousness about earnings and the upcoming release of Windows 8.
McDonald's (MCD +0.18%) was far and away the biggest gainer on the Dow, rising 0.6% on the news that it will start making iPads available for customers to use in some of its restaurants. The move is the Golden Arches' latest attempt to stay ahead of the industry curve by reinventing itself as it has in the past by offering espresso drinks through its McCafe line and adding healthier menu options, and will allow customers to check email and do other online tasks while eating their meal.
Rival Yum! Brands (YUM +0.87%) also received a bump after hours, gaining nearly 4%, as it reported profits jumping 23% in its third quarter on improved growth in China. U.S. profits also increased by 13%, with Taco Bell pacing with a 7% increase in same-store sales. Finally, Alcoa (AA +0.00%) beat earnings estimates with an adjusted profit of $0.03 a share. Analysts had expected an EPS of a penny. Revenue also beat expectations, but the aluminum maker cut its demand outlook on slower growth in China. As a result, shares were down 1.1% after hours.
