Investors had to stomach the benchmarks' eighth fall in ten days
yesterday, as lingering political uncertainty in Europe intensified
its negative impact on the financial arena. The Dow closed at a
four-month low and the S&P 500 recorded its third-consecutive
day of losses. Investors were so focused on these concerns that
they completely negated positive economic readings.
The Dow Jones Industrial Average (DJI) slumped 0.5% to finish at
12,632.00. The Standard & Poor 500 (S&P 500) closed
yesterday's trading session 0.6% lower at 1,330.66. The tech-laden
Nasdaq Composite Index lost 0.3% and ended at 2,893.76. The
fear-gauge CBOE Volatility Index (VIX) moved up 0.5% and settled at
21.97. This was the VIX' third-straight day of gains and it has
gained 15.3% over the past five trading sessions. Consolidated
volumes on the New York Stock Exchange, Nasdaq and American Stock
Exchange were 7.28 billion shares, considerably higher than the
daily average of 6.78 billion shares. Decliners had a better day
than advancing stocks on the NYSE; as for two stocks that moved
down, only one stock that could manage a finish in the green. The
S&P 500 has lost over 6% from the highs it achieved in April
and the Dow has declined by 647 points or almost 5% from its
four-year high of 13,279, achieved on May 1.
Market watchers believed that the day might be a favorable one
given the positive economic numbers. At the beginning of the
session, investors were also hoping for the same and benchmarks
were trading higher. However, by the end of the day things had
taken a turn for the worse. European political uncertainty once
again dented the markets. Before getting on with the news from
across the Atlantic, let us have a look at the few readings that
raised investors' hopes.
On the domestic front, the Federal Reserve Bank of New York's
monthly survey of manufacturers in New York State noted
manufacturing activity in the state had expanded at a 'moderate
pace' in May. The report stated that the general business
conditions index was up eleven points to 17.1, new orders index
moved up to 8.3, and the shipments index was at 24.1 after jumping
eighteen points. The general business conditions index settled at a
significantly higher 9.3, matching consensus estimates.
Separately, the retail sales report from the U.S. Department of
Commerce was also a positive. According to the report: "Advance
estimates of U.S. retail and food services sales for April,
adjusted for seasonal variation and holiday and trading-day
differences, but not for price changes, were $408.0 billion, an
increase of 0.1 percent (±0.5%)* from the previous month and 6.4
percent (±0.7%) above April 2011". The 0.1% increase matched the
Further, the Consumer Price Index for All Urban Consumers
(CPI-U) released by the U.S. Bureau of Labor Statistics remained
flat in April. The index for all items minus food and energy was up
0.2% in April, in line with the 0.2% rise in March. This was also
in line with the consensus estimates.
Economic data from Europe was also encouraging. Investors were
happy to learn that the Euro-zone had narrowly avoided a recession.
Contrary to fears of a contraction, Eurostat confirmed that in the
first quarter Euro-zone recorded 'zero GDP growth'. Zero growth is
never great news. However it is a positive when an economy avoids
back-to-back quarters of contraction. The euro-zone needs to thank
Germany for helping it avoid a contraction, as Germany posted 0.5%
growth in its GDP. On the other hand, while France too had zero GDP
growth, Italy, Spain and Portugal contracted 0.8%, 0.3% and 0.1%,
However, none of the positives were any good in face of the
deepening political uncertainty in Greece. The nation has struggled
for long to form a government and with every passing day the
possibility of exiting the euro is becoming stronger. Political
uncertainty in the region has become a near daily affair for the
markets. The latest development on this front is that Greek
president Karolos Papoulias has urged the nation to go back to
polling yet again. With no clear majority currently, the nation
failed to put a new government in place, a government that would
have negotiated for the next bailout. The euro was down to a
four-year low and with no definite solution in sight, investors'
sentiment was hampered.
Moving on to the sectors, the financials once again bore the
brunt and the Financial Select Sector SPDR (XLF) was down 0.5%.
Financial bellwethers including American Express Company (NYSE:
), Bank of America Corporation (NYSE:
), Citigroup, Inc. (NYSE:
), Morgan Stanley (NYSE:
) and Wells Fargo & Company (NYSE:
) lost 0.8%, 0.7%, 1.2%, 1.1% and 0.5%, respectively.
AMER EXPRESS CO (AXP): Free Stock Analysis
BANK OF AMER CP (BAC): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
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