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Stocks tumble as worries about Europe return
Source: Agencies |
May 15, 2010, Saturday
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STOCKS tumbled for a second day yesterday after concerns grew that the deep spending cuts under Europe's bailout plan would slow a global recovery.
The Dow Jones industrial average ended down 163 points but closed well off its lows of the day. The Dow and other major stock indexes still posted big gains for the week after rocketing higher Monday on hopes that a bailout plan for Europe would prevent a debt crisis in Greece from spreading.
The latest drop followed a slide of more than 3 percent in European markets. The euro dropped to a 19-month low against the dollar.
Investors seeking safety piled into Treasurys and the dollar. Gold settled lower after hitting another record. Crude oil sank nearly 4 percent, and an indicator of stock market volatility jumped.
Currency traders have been moving out of the euro throughout the week because of concerns that cost-cutting measures in countries like Greece, Spain and Portugal would slow economic activity on the continent and elsewhere. Now stock investors are also looking at those same problems.
Shifting sentiment about the problems in Europe whipsawed the market during the week. Major indexes posted their biggest gains in more than a year on Monday after a nearly US$1 trillion rescue package from the European Union and International Monetary Fund raised hopes that debt-strapped EU countries wouldn't be a drag on a global rebound.
But the glow from the bailout package faded during the week, pushing the euro down sharply against the dollar. The spike in the dollar hit the prices for oil and other commodities, hurting major US energy and materials companies.
"Clearly the action in the euro is reflecting the fact that at least currency investors don't think the bailout plan plus the austerity measures are sufficient," said Uri Landesman, president of Platinum Partners in New York. "The euro is leading the market down."
Investors now worry that the spending cuts in Europe being called for in the bailout package will curtail the ability of weaker countries like Spain and Portugal to grow their way out of a recession. More strikes are expected in Spain and Greece as workers protest cuts in pensions and other public spending.
The euro, which is used by 16 countries, slid as low as US$1.2359 in New York, its weakest point since October 2008. The euro has dropped more than 6 percent since the beginning of the month and is close to its lowest level in four years.
There were also concerns yesterday about corporate profits. Shares of credit card companies tumbled after the Senate voted to force them to reduce fees for debit card transactions. Visa fell 9.9 percent, while Mastercard lost 8.6 percent.
The Dow fell 162.79, or 1.5 percent, to 10,620.16. The Dow had been down nearly 246 points. It has fallen seven of the last nine days.
The Standard & Poor's 500 index lost 21.76, or 1.9 percent, to 1,135.68, while the Nasdaq composite index fell 47.51, or 2 percent, to 2,346.85.
Stocks ended off their worst levels perhaps in part becuase traders aren't sure what leaders in Europe might do over the weekend to shore up confidence in the euro and the EU over all.
The market ended off its lows but it was still a wild week for investors. After jumping 405 points on Monday, the Dow slipped Tuesday and jumped 149 points on Wednesday. The gains helped the Dow erase its losses from late in the prior week when fears about debt woes in Greece pounded the market.
Selling resumed Thursday to send the Dow down about 114 points after more worries emerged about the cost of the Euroepan rescue.
For the week, the Dow rose 2.3 percent, the S&P 500 index added 2.2 percent and the Nasdaq gained 3.6 percent.
Treasurys jumped yesterday, pushing down yields. The yield on the benchmark 10-year Treasury note fell to 3.43 percent from 3.53 percent late Thursday.
The Chicago Board Options Exchange's Volatility Index - known as the market's fear gauge, jumped 17.1 percent.
Gold hit a record of US$1,249.70 an ounce before settling down US$1.40 to US$1,227.80.
Crude oil fell US$2.79 to US$71.61 per barrel on the New York Mercantile Exchange.
Investors yesterday looked past improved reports on April retail sales and industrial production.
The Commerce Department said sales rose 0.4 percent in April. That was double the forecast by economists polled by Thomson Reuters. It was the seventh straight monthly rise in sales, providing hope that a consumer rebound will hold and help the economy grow.
The Federal Reserve said industrial production rose 0.8 percent in April, better than the 0.6 percent growth forecast by economists. It was the biggest jump in output from the nation's factories, mines and utilities since January.
Manufacturing growth has been steady in recent months as the sector plays a leading role in the domestic recovery.
Among stocks, Visa Inc. fell US$8.47 to US$77.26 and Mastercard Inc. fell US$19.86 to US$212.45 after the Senate vote to curb fees on debit cards.
About seven stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.5 billion shares compared with 1.2 billion Thursday.
The Russell 200 index of smaller companies lost 15.87, or 2.2 percent, to 693.98.
In Europe, Britain's FTSE 100 dropped 3.1 percent, Germany's DAX index fell 3.1 percent, and France's CAC-40 tumbled 4.6 percent.
The Dow Jones industrial average ended down 163 points but closed well off its lows of the day. The Dow and other major stock indexes still posted big gains for the week after rocketing higher Monday on hopes that a bailout plan for Europe would prevent a debt crisis in Greece from spreading.
The latest drop followed a slide of more than 3 percent in European markets. The euro dropped to a 19-month low against the dollar.
Investors seeking safety piled into Treasurys and the dollar. Gold settled lower after hitting another record. Crude oil sank nearly 4 percent, and an indicator of stock market volatility jumped.
Currency traders have been moving out of the euro throughout the week because of concerns that cost-cutting measures in countries like Greece, Spain and Portugal would slow economic activity on the continent and elsewhere. Now stock investors are also looking at those same problems.
Shifting sentiment about the problems in Europe whipsawed the market during the week. Major indexes posted their biggest gains in more than a year on Monday after a nearly US$1 trillion rescue package from the European Union and International Monetary Fund raised hopes that debt-strapped EU countries wouldn't be a drag on a global rebound.
But the glow from the bailout package faded during the week, pushing the euro down sharply against the dollar. The spike in the dollar hit the prices for oil and other commodities, hurting major US energy and materials companies.
"Clearly the action in the euro is reflecting the fact that at least currency investors don't think the bailout plan plus the austerity measures are sufficient," said Uri Landesman, president of Platinum Partners in New York. "The euro is leading the market down."
Investors now worry that the spending cuts in Europe being called for in the bailout package will curtail the ability of weaker countries like Spain and Portugal to grow their way out of a recession. More strikes are expected in Spain and Greece as workers protest cuts in pensions and other public spending.
The euro, which is used by 16 countries, slid as low as US$1.2359 in New York, its weakest point since October 2008. The euro has dropped more than 6 percent since the beginning of the month and is close to its lowest level in four years.
There were also concerns yesterday about corporate profits. Shares of credit card companies tumbled after the Senate voted to force them to reduce fees for debit card transactions. Visa fell 9.9 percent, while Mastercard lost 8.6 percent.
The Dow fell 162.79, or 1.5 percent, to 10,620.16. The Dow had been down nearly 246 points. It has fallen seven of the last nine days.
The Standard & Poor's 500 index lost 21.76, or 1.9 percent, to 1,135.68, while the Nasdaq composite index fell 47.51, or 2 percent, to 2,346.85.
Stocks ended off their worst levels perhaps in part becuase traders aren't sure what leaders in Europe might do over the weekend to shore up confidence in the euro and the EU over all.
The market ended off its lows but it was still a wild week for investors. After jumping 405 points on Monday, the Dow slipped Tuesday and jumped 149 points on Wednesday. The gains helped the Dow erase its losses from late in the prior week when fears about debt woes in Greece pounded the market.
Selling resumed Thursday to send the Dow down about 114 points after more worries emerged about the cost of the Euroepan rescue.
For the week, the Dow rose 2.3 percent, the S&P 500 index added 2.2 percent and the Nasdaq gained 3.6 percent.
Treasurys jumped yesterday, pushing down yields. The yield on the benchmark 10-year Treasury note fell to 3.43 percent from 3.53 percent late Thursday.
The Chicago Board Options Exchange's Volatility Index - known as the market's fear gauge, jumped 17.1 percent.
Gold hit a record of US$1,249.70 an ounce before settling down US$1.40 to US$1,227.80.
Crude oil fell US$2.79 to US$71.61 per barrel on the New York Mercantile Exchange.
Investors yesterday looked past improved reports on April retail sales and industrial production.
The Commerce Department said sales rose 0.4 percent in April. That was double the forecast by economists polled by Thomson Reuters. It was the seventh straight monthly rise in sales, providing hope that a consumer rebound will hold and help the economy grow.
The Federal Reserve said industrial production rose 0.8 percent in April, better than the 0.6 percent growth forecast by economists. It was the biggest jump in output from the nation's factories, mines and utilities since January.
Manufacturing growth has been steady in recent months as the sector plays a leading role in the domestic recovery.
Among stocks, Visa Inc. fell US$8.47 to US$77.26 and Mastercard Inc. fell US$19.86 to US$212.45 after the Senate vote to curb fees on debit cards.
About seven stocks fell for every one that rose on the New York Stock Exchange, where volume came to 1.5 billion shares compared with 1.2 billion Thursday.
The Russell 200 index of smaller companies lost 15.87, or 2.2 percent, to 693.98.
In Europe, Britain's FTSE 100 dropped 3.1 percent, Germany's DAX index fell 3.1 percent, and France's CAC-40 tumbled 4.6 percent.
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