European debt concerns returned to haunt the markets and
overshadowed strong corporate results to end the benchmarks'
three-day winning streak. An announcement by Spain's autonomous
region Valencia's government that it was seeking financial aid
reminded investors of the flagging condition of Europe's economy.
European debt concerns have taken a backseat over the past few days
and earnings results hogged the limelight to lift benchmarks
higher. However, it quite was the opposite case on Friday. Losses
on Friday eroded the Dow's and Nasdaq's July gains, but all of the
benchmarks maintained their weekly gains.
The Dow Jones Industrial Average (DJI) slumped 120.79 points or
0.9% and closed at 12,822.57. The Standard & Poor 500 (S&P
500) inched down 1% to finish Friday's trading session at 1,362.66.
The tech-laden Nasdaq Composite Index plunged 1.4% and was down to
2,925.30. The fear-gauge CBOE Volatility Index (VIX) gained 5.3%
and settled at 16.27. Consolidated volumes on the New York Stock
Exchange, the Nasdaq and the American Stock Exchange were 6.7
billion shares, matching the 50-day moving average. Declining
stocks outpaced the advancers on the NYSE; as for 64% stocks that
dropped, 33% stocks moved higher.
The headline that dominated the markets' direction was the
announcement by the Valencia region's government that it would seek
financial help from Madrid. The Valencia regional government
stated: "Valencia, like in other autonomous regions, is suffering
the consequences of the liquidity shortage in markets due to the
economic crisis". The region still has to repay €2.85 billion by
year end. The news reminded investors' about the lingering economic
troubles of Europe.
Further, the Spanish government forecasted that the nation will
have to continue to endure another year of recession in 2013. The
Budget Minister Cristobal Montoro said gross domestic product (GDP)
is now forecasted to contract by 0.5% in 2013 as against prior
expectations of a growth of 0.2%. The news fuelled investors'
apprehensions about the economic situation and was reflected in the
markets' downfall. Spain's equity benchmark was down 5.8% and the
10-year bond yields also sprung. Ripple effects were felt in the US
too and markets suffered heavy losses on Friday.
The banking sector is usually most vulnerable to such
developments. The KBW Bank Index (BKX) slumped 1.9% and stocks
including Bank of America Corporation (NYSE:
), Citigroup, Inc. (NYSE:
), Morgan Stanley (NYSE:
), Regions Financial Corporation (NYSE:
) and SunTrust Banks, Inc. (NYSE:
) dropped 2.6%, 2.7%, 3.6%, 3.6% and 3.0%, respectively.
The European debt woes overpowered another round of strong
corporate figures. Markets had been enjoying an uptrend on most of
the past few days, buoyed by encouraging earnings results. However,
encouraging figures from companies including General Electric
), Schlumberger Limited (NYSE:
) (1.0%) and Baker Hughes Incorporated (NYSE:
) did the little to help the indices on Friday. While General
Electric and Schlumberger gained 0.4% and 1.0%, respectively, Baker
Hughes jumped a sharp 9.2%. Also, SanDisk Corporation (NASDAQ:
) surged 10.3% following second quarter results. The company gave a
bright outlook going forward. Management believes that demands for
mobile and SSD solutions will be higher, thus adding to
As mentioned earlier, the earnings surprises could not help
benchmarks finish in the green. However, the benchmarks managed to
hold onto the gains for the week. The Dow, S&P 500 and Nasdaq
were up 0.4%, 0.4% and 0.6%, respectively.
BANK OF AMER CP (BAC): Free Stock Analysis
BAKER-HUGHES (BHI): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
GENL ELECTRIC (GE): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
REGIONS FINL CP (RF): Free Stock Analysis
SCHLUMBERGER LT (SLB): Free Stock Analysis
SANDISK CORP (SNDK): Free Stock Analysis Report
SUNTRUST BKS (STI): Free Stock Analysis Report
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