The hoopla about Facebook's initial public offering fizzled out
on Friday as investors remained worried abut the European economic
situation, leading to another negative finish for the benchmarks.
Ratings agency Fitch had worrying news for Greece and 16 Spanish
banks were downgraded by Moody's in a separate development. Amidst
lingering European concerns, which threaten even global markets, US
benchmarks could not escape another round of weekly losses.
The Dow Jones Industrial Average (DJI) slumped 0.6% and was down
to 12,369.38. The Standard & Poor 500 (S&P 500) plunged
0.7% and finished Friday's trading session at 1,295.22. The
tech-laden Nasdaq Composite Index crashed 1.2% and ended at
2,778.79. The fear-gauge CBOE Volatility Index (VIX) continued its
uptrend even on Friday and jumped 2.5% to settle at 25.10.
Consolidated volumes on the New York Stock Exchange, Nasdaq and
American Stock Exchange were roughly 8.8 billion shares, sharply
higher than the daily average of 6.83 billion. Declining stocks yet
again outpaced the advancers on the NYSE; as for 73% of stocks that
declined, only 24% stocks could manage to climb higher.
One of the most-anticipated IPOs this year- Facebook, Inc.
) was also the most actively traded stock on the Nasdaq on Friday.
Facebook's volumes amounted to 580,587,742 shares and witnessed a
volatile run. The stock, which was priced at $38.00, soared 10% in
the morning, hitting a high of $45.00 a share, but the gains
fizzled out and it ended a mere 0.6% higher from its issue price at
Initially, investors had no clue about their orders for Facebook
as Nasdaq suffered a technical glitch. Trading was delayed by half
an hour on the Nasdaq as it suffered some issues with sending
trading messages. While Nasdaq could fix the problem only at 1:50
p.m., shares of Nasdaq market's parent company Nasdaq OMX Group
) took a hit and closed at 4.4% lower on Friday.
While excitement over Facebook waned, benchmarks were once again
affected by European financial woes. With Greece looking likely to
exit the euro, ratings agency Fitch downgraded Greece's long-term
rating by a notch to 'CCC' from 'B-'. Things in Greece have not
been smooth owing to its political turmoil, which majorly impacted
the ratings agency's decision. Fitch stated: "The downgrade of
Greece's sovereign ratings reflects the heightened risk that Greece
may not be able to sustain its membership of Economic and Monetary
Greece went to the polls earlier this month on the 6
and with no clear majority for any political party, the country has
failed to form a government. Greece needs to secure its next
tranche of bailout, failing which it will default and will also
exit the euro. Amidst such a scenario, the President has called for
another election next month. However, if an anti-austerity party
comes to power, international lenders might choose to withhold the
bailout package. As of now, with every passing day the possibility
of Greece exiting the euro is getting higher. "A Greek exit would
likely result in widespread default on private sector as well as
sovereign euro-denominated obligations, despite a moderate
sovereign debt service burden following the restructuring of Greek
government bonds in March," Fitch added.
In another development, Moody's Investor Service downgraded 16
Spanish banks, reflecting the financial troubles of the nation as
well as the entire region. Moody"s said: "Amidst the ongoing euro
area debt crisis, the Spanish government's rising budget deficit
and the renewed recession, sovereign creditworthiness has
declined…This decline is a driver of today's bank rating
These concerns dampened sentiment in U.S. markets and financials
were big losers once again. The Financial Select Sector SPDR (XLF)
dropped 1.1% and financial stocks including Citigroup Inc. (NYSE:
), JPMorgan Chase & Co. (NYSE:
), Goldman Sachs Group, Inc. (NYSE:
), Barclays PLC (ADR) (NYSE:
), Regions Financial Corporation (NYSE:
) and Wells Fargo & Company (NYSE:
) dropped 1.5%, 1.3%, 1.6%, 1.9%, 1.0% and 1.6%, respectively.
With Friday's fall, markets ended another week on the losing
note. The Dow, S&P 500 and Nasdaq lost 3.5%, 4.3% and 5.3%,
respectively. The fear-gauge index too stood testimony to
increasing apprehensions and concerns in the markets. The VIX
jumped by nearly 10% twice last week and was also trading at its
highest level since late December last year. As for the 5-day
change, last week, VIX soared 26.2%.
BARCLAY PLC-ADR (BCS): Free Stock Analysis
CITIGROUP INC (C): Free Stock Analysis Report
FACEBOOK INC-A (FB): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis
NASDAQ OMX GRP (NDAQ): Free Stock Analysis
REGIONS FINL CP (RF): Free Stock Analysis
WELLS FARGO-NEW (WFC): Free Stock Analysis
To read this article on Zacks.com click here.