Davin blog

Materials stocks fall on fear of Chinese rate hike

NEW YORK – Concerns that China will take steps to slow its economic expansion sent commodities and materials stocks lower Thursday.

China reported that its economy expanded 10.3 percent in 2010. Economists expect that China's central bank will increase interest rates to slow down growth and keep inflation in check.

Demand from China has sent commodities prices surging over the past year.

"All investors and companies these days are clinging to this Chinese demand story," said Jack Ablin, chief investment officer at Harris Private Bank. "And anything that could cause that to falter could have ugly implications."

Oil and copper fell more than 2 percent. Silver fell 5 percent.

Freeport-McMoRan Copper & Gold Inc. dropped 4 percent even after the mining giant reported 60 percent higher income in the fourth quarter as a result of higher copper and gold prices. DuPont fell 1.6 percent and Dow Chemical Co. fell 2.5 percent.

The decline in commodities was tempered by slightly better news on the U.S. job market. The Labor Department reported that the number of people filing claims for unemployment benefits for the first time fell to 404,000 last week, below forecasts.

The better economic news pushed bond prices lower. The yield on the 10-year Treasury note rose to 3.43 percent from 3.34 percent late Wednesday. Yields and prices move in opposite directions.

The Dow Jones industrial average fell 2.49 points, or less than 0.1 percent, to 11,822.8.

The Standard & Poor's 500 index lost 1.66, or 0.1 percent, to 1,280.26. The technology-focused Nasdaq composite index fell 21.07, or 0.8 percent, to 2,704.29.

Materials stocks lost 1.5 percent, the most out of the 10 company groups that make up the S&P 500. Utility companies rose the most, 0.6 percent.

Morgan Stanley rose 5 percent to $29.02 after reporting that its fourth-quarter income jumped 60 percent thanks to strong investment banking revenues.

Wendy's/Arby's Group Inc. jumped 6.9 percent to $4.78 after the company said it is considering selling its struggling Arby's business and concentrating on its hamburger chain.

Google Inc. announced after the market closed that it earned $7.81 per share last quarter, well above analyst's expectations. The Internet search giant also said that co-founder Larry Page will take over as chief executive effective April 4. Eric Schmidt, the current CEO, will become executive chairman. The company was up 2 percent in after-market trading.

Two stocks fell for every one that rose on the New York Stock Exchange. Consolidated volume was 5 billion shares.