April 25, 2024

Stocks and Bonds: Europe’s Debt Problems Send Shares Lower

Oil rose $1.89, to $99.59 a barrel, after major banks raised their forecasts for crude prices. Goldman Sachs, JPMorgan and Morgan Stanley analysts predicted a rise in global demand would drive oil prices higher later this year. Goldman analysts said oil prices could reach $135 a barrel by the end of 2012.

Stocks swung between gains and losses throughout the day, with Chevron and other energy firms posting the largest gains.

The Dow Jones industrial average fell 25.05 points, or 0.20 percent, to 12,356.21. The Standard Poor’s 500-stock index dropped 1.09 points, or 0.08 percent, to 1,316.28. The Nasdaq composite index declined 12.74 points, or 0.46 percent, to 2,746.16.

Stocks had been lifted in the first four months of the year by stronger earnings reports, an improving job market and other signs of economic recovery. But all three major indexes have lost more than 3.5 percent this month, even as earnings remain strong. Widespread optimism has been offset by a host of concerns, especially the effect of higher oil prices on consumer spending and the risk that debt troubles in Europe could get worse.

Markets faced more troubling news about Europe on Tuesday, when Greece’s main opposition party said it opposed the government’s latest endeavors to reduce debt. The news further reduced hopes that the country might be able to repair its finances enough to get another loan package from the International Monetary Fund.

The ratings agency Moody’s also warned that a restructuring of Greece’s debt would be considered a default. That would cause borrowing costs for other debt-burdened European countries to soar.

Uri Landesman, president of the hedge fund manager Platinum Partners, said a Greek default could start a chain reaction affecting larger countries like Spain, wreaking havoc on the global economy. “If you had a Spanish default, there wouldn’t be a single world bank not affected,” Mr. Landesman said.

United States banks had $187 billion at stake in Spain as of the end of last September, according to the most recent data from the Bank for International Settlements. The amount includes holdings of government debt, derivative contracts and other commitments.

The Commerce Department reported that sales of new homes rose slightly in April, but at a rate far below what would be normal in a healthy housing market. New home sales rose to an annual rate of 323,000, from 300,000 in March.

The energy company El Paso rose 6.53 percent, to $20.22, after saying it planned to split itself into two publicly traded businesses by the end of this year.

AutoZone rose 6 percent, to $293.30, after the specialty retailer’s earnings jumped 12 percent on strong sales of its Duralast auto parts.

Medtronic fell 1 percent, to $40.88, after its earnings fell short of forecasts.

The Treasury’s 10-year note rose 4/32 to 100 3/32. The yield fell to 3.11 percent, from 3.13 percent late Monday.

Article source: http://feeds.nytimes.com/click.phdo?i=d7cf17d3cdc7200a487a74d3dbb4a9cf

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