Markets suffered a heavy fall yesterday as political uncertainty
in Europe continued and China's economic health looked gloomier
than previously perceived. Financial bellwether JPMorgan's
disclosure that it had suffered a $2 billion trading loss remained
an overhang on the markets and dragged down financials once again.
As the benchmarks finished in the red, S&P 500 recorded its
lowest level since February.
The Dow Jones Industrial Average (DJI) inched down 1% to close
at 12,695.35. The Standard & Poor 500 (S&P 500) lost 1.1%
and finished yesterday's trading session at 1,338.35. The
tech-laden Nasdaq Composite Index slumped 1.1% and ended at
2,902.58. The fear-gauge CBOE Volatility Index (VIX) jumped almost
10% to settle significantly higher at 21.87. Consolidated volumes
on the New York Stock Exchange, Nasdaq, and the American Stock
Exchange were roughly 6.6 billion shares, lower than the daily
average of 6.78 billion shares. Declining stocks hammered the
advancing ones on the NYSE; as for every five stocks that ended
lower, only one stock could move higher.
Benchmarks had raised high hopes earlier this year, when they
started with a bang. Aside from a few low days, benchmarks sprung
to individual key levels and sustained those levels for a while.
However, over the past couple of weeks benchmarks have been
vulnerable to European concerns arising out of political
uncertainty and rising borrowing costs. They have also been dented
by a mixed bag of domestic economic data as well as by dismal data
from Europe and China. It hasn't been smooth sailing, which is
highlighted by the fact that the Dow has closed in the red on eight
occasions out of the last nine trading days and the S&P 500
recorded its fourth decline out of five sessions. Moreover, the
benchmarks are almost near their three-month lows and last week the
Dow posted its worst weekly performance for the year.
Things were no different yesterday as European concerns
continued to hamper domestic sentiment. Greece is still struggling
to form a government. On Monday, President Karolos Papoulias called
four party leaders for talks, but optimism arising out of this
development soon vanished after the SYRIZA party denied attending
the meeting, which was followed by another leftist leader walking
out. With the nation still grappling to form a government and signs
strongly suggesting that things are getting tougher, Greece may
soon default on its debt and eventually exit the euro. The nation
needs a government to secure the bailout and avoid this scenario.
Following yesterday's developments, Greece, Italy and Spain
witnessed another rise in their borrowing costs.
Additionally, German chancellor Angela Merkel seemed to be in a
tough spot, after centre left Social Democrats defeated her
Christian Democrat party in a poll by a huge margin. This yet again
reflects the public's attitude to austerity measures. Merkel termed
it as a "bitter, painful defeat", but she said that she will still
stick to the austerity plans.
Meanwhile, China's has decided to reduce the amount of cash that
the country's banks must retain. The decision was described ad
'pro-growth' and was aimed at easing the monetary situation.
However, with most of the data coming in over the last few days
being of a disappointing nature, investors' faith in the
second-largest economy has reduced and the possibility of a
softening economy weighed on the markets.
Shifting to the domestic front, an earlier disclosure by
JPMorgan Chase & Co. (NYSE:
) about suffering a loss of $2 billion continued to hamper he
sentiments. In latest developments, Ina Drew resigned as the chief
investment officer, thus becoming the first among the top
executives to vacate office after the incident.
Shares of JPMorgan slumped 3.2% and the stock emerged as the
biggest loser among the 30 Dow components. Other financial stocks
in the Dow, American Express Company (NYSE:
) and Bank of America Corporation (NYSE:
) suffered losses of 2.1% and 2.7%, respectively. Financials had a
bad day and the Financial Select Sector SPDR (XLF) slipped as much
as 2.1%. Shares including Citigroup, Inc. (NYSE:
), Morgan Stanley (NYSE:
), The Goldman Sachs Group, Inc. (NYSE:
) and Wells Fargo & Company (NYSE:
) lost 4.1%, 4.4%, 2.3% and 2.7%, respectively.
AMER EXPRESS CO (AXP): Free Stock Analysis
BANK OF AMER CP (BAC): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
MORGAN STANLEY (MS): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
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