Spooked by European financial concerns and a sharp decline in
commodity prices, benchmarks ended in negative territory for the
third-straight day. Borrowing costs recorded euro-era highs and
domestic economic data was not strong enough to negate lingering
concerns.
The Dow Jones Industrial Average (DJIA) plunged 1.1% to settle
the day at 11823.48. The Standard & Poor 500 (S&P 500) also
inched down 1.1% to close yesterday's trading session at 1211.82.
The Nasdaq Composite Index slumped 1.6% and finished at 2539.31.
The fear-gauge CBOE Volatility Index (VIX) was up 2.5% to finish at
26.04. Decliners once again outnumbered advancing stocks on the New
York Stock Exchange (NYSE), with only 28% of the stocks moving up,
compared to 70% for the decliner. Consolidated volumes on the NYSE,
Amex and Nasdaq, were 7.8 billion shares.
The Dow declined to a two-week low and only 6 of the 30 Dow
components could close in the green yesterday. Verizon
Communications Inc. (NYSE:
VZ
) managed to end flat, while the remaining 23 stocks of the
blue-chip index had to settle in the red zone. The declines were
led by Caterpillar Inc. (NYSE:
CAT
), Bank of America Corporation (NYSE:
BAC
), Cisco Systems, Inc. (NASDAQ:
CSCO
), Hewlett-Packard Company (NYSE:
HPQ
) and United Technologies Corp. (NYSE:
UTX
) and they were down 4.4%, 1.7%, 2.7%, 1.6%, 1.4%,
respectively.
Since the beginning of this week, financial markets have been
facing several headwinds. Last Friday, markets closed with
investors drawing optimism from the European accord that all
euro-members apart from Britain agreed to implement. However,
markets were dealt a serious blow on Monday after ratings agencies
Fitch Ratings and Moody's Investors Service criticized the same
deal. Additionally, on Tuesday, the Federal Reserve acknowledged
that the global financial economic scenario can significantly
impact US markets. Sentiments were dampened further when German
Chancellor Angela Merkel yesterday voiced her opposition against
hiking the lending power of the euro-zone bailout fund.
With steep continued declines in the euro, investors know that
debt woes are well and truly alive. Yesterday, the euro dropped to
its lowest point since January this year, settling below $1.30.
With yesterday's drop, the euro is now down 3% over the past three
days. On the last few occasions, the greenback has been gaining an
upper hand over the rest of the major currencies, and this has also
adverse impacted the pricing of the commodities.
Gold futures slumped 4.6% to settle at a five month low of
$1,584.30 an ounce. The yellow-metal is now down 9.2% for the
month. Copper prices slumped 4.7% and silver crashed down 7.4%. The
crude prices also suffered a heavy battering and crude-oil futures
slouched 5.2% to settle at $94.95 per barrel.
These developments took a heavy toll on metal and energy shares.
Coming to metal stocks, Southern Copper Corp. (NYSE:
SCCO
), Thompson Creek Metals Company Inc. (NYSE:
TC
), Newmont Mining Corp. (NYSE:
NEM
), Western Copper and Gold Corporation (AMEX:
WRN
) and Cliffs Natural Resources Inc. (NYSE:
CLF
) plunged 1.5%, 2.0%, 2.4%, 2.5% and 2.6%, respectively. As for
energy shares, Exxon Mobil Corporation (NYSE:
XOM
), Marathon Oil Corporation (NYSE:
MRO
), Hess Corporation (NYSE:
HES
) and Occidental Petroleum Corporation (NYSE:
OXY
) dropped 1.4%, 2.4%, 4.4% and 3.6%, respectively.
Borrowing costs also soared higher across the Atlantic, hinting
at increasing fears of a sovereign debt crisis. The five-year bond
yield of Italy rose to 6.5%, a euro-era high. It exceeded the
previous high of 6.3%, recorded last month. Additionally, the
10-year bond yield was once again back above unsustainable levels,
at 7.2%. Not only Italy, but France, Germany and Spain have also
been affected by incremental borrowing costs.
Coming back to the domestic front, the U.S. Bureau of Labor
Statistics reported that import prices in the US increased 0.7% in
November, and export prices edged up 0.1% in November. Consensus
estimates for the import prices was pegged at an increase of 1%.
The report also stated: "Import prices rose 0.7 percent in November
following declines of 0.5 percent, 0.1 percent, and 0.4 percent the
three previous months. The November advance is the largest monthly
increase since a 2.6 percent rise in April," and added, "Export
prices advanced 0.1 percent in November after a 2.1 percent drop
the previous month. In November, a rise in agricultural prices more
than offset falling nonagricultural prices".
Separately, the National Association of Realtors said due to the
double counting of the data on sales of previously owned homes,
figures will be revised downwards.
BANK OF AMER CP (
BAC
): Free Stock Analysis Report
CATERPILLAR INC (
CAT
): Free Stock Analysis Report
CLIFFS NATURAL (
CLF
): Free Stock Analysis Report
CISCO SYSTEMS (
CSCO
): Free Stock Analysis Report
HESS CORP (
HES
): Free Stock Analysis Report
HEWLETT PACKARD (HPQ): Free Stock Analysis
Report
MARATHON OIL CP (MRO): Free Stock Analysis
Report
NEWMONT MINING (NEM): Free Stock Analysis
Report
OCCIDENTAL PET (OXY): Free Stock Analysis
Report
SOUTHERN COPPER (SCCO): Free Stock Analysis
Report
THOMPSON CREEK (TC): Free Stock Analysis Report
UTD TECHS CORP (UTX): Free Stock Analysis
Report
VERIZON COMM (VZ): Free Stock Analysis Report
EXXON MOBIL CRP (XOM): Free Stock Analysis
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