US markets tumbled for the third consecutive time this week
after Germany's auction of 10 year government bonds received a weak
response from the markets. Indices deteriorated further on news of
a fall in China's manufacturing activity.
The Dow Jones Industrial average (DJIA) declined 2.05% to end at
11,257.55. The Standard & Poor 500 (S&P 500) was down by
2.21% to close at 1,161.80 while the Nasdaq Composite Index dropped
2.43% to end at 2,460.08. The fear-gauge CBOE Volatility Index
(VIX) ended at 33.98. Consolidated volumes on the New York Stock
Exchange (NYSE), Amex and Nasdaq were 6.9 billion shares, lower
than the current daily average of 8 billion shares. The Dow Jones
has relinquished more than half of the gains made during a rally in
October and is now at a six week low. The S&P 500 has also been
declining steadily for six trading days.
While Germany failed to raise the capital it had planned through
its new 10 year bonds, the situation became worse after news came
in that Belgium would be unable to pay its agreed share for the
rescue of French-Belgian bank Dexia. This would bring additional
financial pressure to bear on France though both the French and
Belgian authorities have denied renegotiating the dismantling of
Dexia. The situation created uncertainty among investors as US
markets deteriorated before the Thanksgiving holiday on
Thursday.
Meanwhile there is increasing speculation that the US may
experience a further downgrading of its credit rating. Investors
are already disappointed by lower than expected growth in the US
economy which came in below expectations in the third quarter. To
add on to the woes of the markets, data from China saw HSBC
manufacturing Purchasing Managers Index, which keeps track of the
country's manufacturing activity, fall to 48.0 in November. This
created a stir in the markets as a figure below 50 indicates a
contraction in manufacturing activity.
The financial sector was among the worst sufferers on Wednesday
with stocks of Bank of America (NYSE:
BAC
) decreasing by 4.28% while Citigroup (NYSE:
C
), Wells Fargo & Company (NYSE:
WFC
), JP Morgan Chase (NYSE:
JPM
) and Morgan Stanley (NYSE:
MS
) decline by 3.88%, 3.01%, 3.50% and 3.62% respectively. The energy
sector was badly hit as well and stocks of Chevron (NYSE:
CVX
) and Suncor Energy (NYSE:
SU
) fell by 2.77% and 5.60% respectively.
With fears that a recession was close at hand due to the
lingering European debt crisis, investors received no respite from
the initial jobless claims report by the US labor department which
showed that the figure increased by 2,000 for the week ending Nov
19. At 393,000, the figure is slightly above the expected figure of
390,000 but well below 400,000. There are signs that firing has
slowed down and is now stabilizing.
Meanwhile, a report from the Commerce department shows a
decrease in demand for durable goods by 0.7% for the month of
October, compared to the September decline of 1.5%. Meanwhile,
consumer spending has gone up slightly by 0.1% last month, lower
than the expected increase. Incomes however, have been more
responsive and are up 0.4%.
BANK OF AMER CP (
BAC
): Free Stock Analysis Report
CITIGROUP INC (
C
): Free Stock Analysis Report
CHEVRON CORP (
CVX
): Free Stock Analysis Report
JPMORGAN CHASE (
JPM
): Free Stock Analysis Report
MORGAN STANLEY (
MS
): Free Stock Analysis Report
SUNCOR ENERGY (SU): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis
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