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Stocks fall as worries about European debt return
Source: Agencies |
September 8, 2010, Wednesday
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STOCKS closed lower yesterday following new worries about Europe's debt problems. Treasury prices rose and gold settled at a new high as investors sought out safe assets.
European stocks fell following news reports that banks there may have more risky government debt on their books than was disclosed during "stress tests" earlier this year. That could mean fees from regulators and more capital-raising by the banks to bolster their balance sheets.
"The soundness of stress tests are, and continue to be, in question," said Brian O'Reilly, president of the Collingwood Group. Uncertainty about the tests could be a drag on the market until European regulators provide some more transparency about exactly what figures were included in the test, O'Reilly said.
Shares of European banks mostly fell and the dollar rose against the euro.
The reports renewed worries about Europe's government debt, which had flared up earlier this year following a fiscal crisis in Greece that spread to other weak European economies including Portugal and helped bring stock prices down worldwide.
The Dow Jones industrial average fell 107.24 points, or 1.0 percent, to close at 10,340.69.
The S&P 500 index lost 12.67, or 1.1 percent, to 1,091.84, while the Nasdaq fell 24.86, or 1.1 percent, to 2,208.89
About three stocks fell for every one that rose on the New York Stock Exchange, where volume was very light at 830.3 million shares.
Volume often starts to pick back up after Labor Day when traders return from summer vacations. But Brian Peardon, a wealth adviser at Harrison Financial Group, said many investors might continue to stay out of the market even when they get back because of uncertainty about the global economy.
"It's very tough for the public to decipher what's happening," Peardon said.
Uncertain investors continue to pour money into Treasurys. The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.60 percent from 2.71 percent late Friday. Its yield is often used as a gauge to set interest rates on mortgages and other consumer loans.
Gold also rose as investors took money out of stocks and sought out other assets seen as having more stable value. Gold for December delivery rose US$8.20 to settle at US$1,259.30 an ounce.
Several reports later this week could shed more light on the U.S. economy including the "beige book" report from the Federal Reserve coming out on Wednesday and weekly unemployment numbers due out on Thursday.
"What it's going to take to keep (a rally) going is more good news," said James Angel, professor of finance at Georgetown University's McDonough School of Business. Economic data continues to show the economy is growing, but the exact pace of that growth is still uncertain.
The inconsistency in economic reports has left traders overreacting to every bit of news released, Angel said. Stocks last week got a big lift after better-than-expected reports on manufacturing and employment after falling for nearly all of August.
Shares of Swiss bank UBS AG dropped 53 cents, or 2.9 percent, to US$17.52. Spanish bank Banco Santander SA fell 48 cents, or 3.8 percent, to US$12.20.
Barclays PLC fell US$1.15, or 5.7 percent, to US$19.13. The British bank also announced Robert E. Diamond Jr., who built the company's global investment bank, will take over as CEO next year.
In European trading, Britain's FTSE 100 fell 0.6 percent, Germany's DAX index dropped 0.6 percent, and France's CAC-40 fell 1.1 percent.
European stocks fell following news reports that banks there may have more risky government debt on their books than was disclosed during "stress tests" earlier this year. That could mean fees from regulators and more capital-raising by the banks to bolster their balance sheets.
"The soundness of stress tests are, and continue to be, in question," said Brian O'Reilly, president of the Collingwood Group. Uncertainty about the tests could be a drag on the market until European regulators provide some more transparency about exactly what figures were included in the test, O'Reilly said.
Shares of European banks mostly fell and the dollar rose against the euro.
The reports renewed worries about Europe's government debt, which had flared up earlier this year following a fiscal crisis in Greece that spread to other weak European economies including Portugal and helped bring stock prices down worldwide.
The Dow Jones industrial average fell 107.24 points, or 1.0 percent, to close at 10,340.69.
The S&P 500 index lost 12.67, or 1.1 percent, to 1,091.84, while the Nasdaq fell 24.86, or 1.1 percent, to 2,208.89
About three stocks fell for every one that rose on the New York Stock Exchange, where volume was very light at 830.3 million shares.
Volume often starts to pick back up after Labor Day when traders return from summer vacations. But Brian Peardon, a wealth adviser at Harrison Financial Group, said many investors might continue to stay out of the market even when they get back because of uncertainty about the global economy.
"It's very tough for the public to decipher what's happening," Peardon said.
Uncertain investors continue to pour money into Treasurys. The yield on the 10-year Treasury note, which moves opposite its price, fell to 2.60 percent from 2.71 percent late Friday. Its yield is often used as a gauge to set interest rates on mortgages and other consumer loans.
Gold also rose as investors took money out of stocks and sought out other assets seen as having more stable value. Gold for December delivery rose US$8.20 to settle at US$1,259.30 an ounce.
Several reports later this week could shed more light on the U.S. economy including the "beige book" report from the Federal Reserve coming out on Wednesday and weekly unemployment numbers due out on Thursday.
"What it's going to take to keep (a rally) going is more good news," said James Angel, professor of finance at Georgetown University's McDonough School of Business. Economic data continues to show the economy is growing, but the exact pace of that growth is still uncertain.
The inconsistency in economic reports has left traders overreacting to every bit of news released, Angel said. Stocks last week got a big lift after better-than-expected reports on manufacturing and employment after falling for nearly all of August.
Shares of Swiss bank UBS AG dropped 53 cents, or 2.9 percent, to US$17.52. Spanish bank Banco Santander SA fell 48 cents, or 3.8 percent, to US$12.20.
Barclays PLC fell US$1.15, or 5.7 percent, to US$19.13. The British bank also announced Robert E. Diamond Jr., who built the company's global investment bank, will take over as CEO next year.
In European trading, Britain's FTSE 100 fell 0.6 percent, Germany's DAX index dropped 0.6 percent, and France's CAC-40 fell 1.1 percent.
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