Stock Market News for May 16, 2012 - Market News


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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 consensus estimates.

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%, respectively.

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: AXP ), Bank of America Corporation (NYSE: BAC ), Citigroup, Inc. (NYSE: C ), Morgan Stanley (NYSE: MS ) and Wells Fargo & Company (NYSE: WFC ) lost 0.8%, 0.7%, 1.2%, 1.1% and 0.5%, respectively.

AMER EXPRESS CO (AXP): Free Stock Analysis Report
BANK OF AMER CP (BAC): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
MORGAN STANLEY (MS): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , US Markets
More Headlines for: AXP , BAC , C , MS , XLF

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