February 26, 2024

Stocks & Bonds: Stocks Slide as Greek Talks Drag On

Financial markets were focused in part on a conference call between Greek officials and the so-called troika of foreign creditors — the International Monetary Fund, the European Commission and the European Central Bank — as well as further meetings among senior officials in Athens struggling to close a budget gap.

But the Greek finance ministry tried to deflate expectations of a speedy result. The conversation lasted around two hours on Monday evening before it was adjourned until Tuesday morning.

In Europe, market indexes fell about 3 percent, the euro declined and the price of safe assets like German bonds rose as investors continued to fret about the possibility of a Greek default. In the United States, stock indexes traded most of the day about 2 percent lower and bond prices rose.

Late Monday, Standard Poor’s announced it was cutting the credit rating of Italy’s sovereign debt, to A from A+, with a negative outlook. S. P. cut its forecast for Italy’s economic growth, a slowdown that would make the country’s fiscal targets difficult to hit, the agency said.

On Wall Street earlier Monday, stocks firmed slightly at the close, with the Standard Poor’s 500-stock index down nearly 1 percent, or 11.92 points, to 1,204.09. The Dow Jones industrial average was down 0.9 percent to 11,401.01, and the Nasdaq briefly reached into positive territory late in the day before closing 0.4 percent lower at 2,612.83.

Financial stocks were hard hit. Bank of America was down more than 3 percent at $6.99. Wells Fargo declined 2.5 percent to $24.33, and Citigroup fell 4.4 percent to $27.71. JPMorgan Chase was 2.8 percent lower at $32.49.

The 10-year Treasury bond rose 29/32 to 101 17/32, sending its yield down to 1.96 percent from 2.06 percent on Friday.

The Federal Reserve’s policy-making committee meets on Tuesday and Wednesday, and investors say they believe the Fed may announce new measures to promote economic growth.

Anthony Valeri, a fixed-income investment strategist for LPL Financial, said he believed that investors had already priced in the expected action, making Monday’s movements in bonds “exclusively risk aversion” caused by the lack of progress in Europe.

Some analysts now fear that given the legal complications in some euro zone countries, and the apparent reluctance of Greece to push ahead on the kind of commitments on spending, wages and privatizations being sought by its partners, Greece might soon default, starting a domino effect on other countries like Portugal, Italy or Spain.

Those fears were compounded after the party of Chancellor Angela Merkel of Germany lost ground in a regional election in Berlin on Sunday, amid voter anger over her handling of the debt crisis.

“The background noise of the Greek debt crisis resembles a continuous alarm tone,” Rainer Guntermann and Peggy Jäger, analysts at Commerzbank, said in a research note. “With few tangible results coming from the finance ministers’ meeting over the weekend and still little official indication that the Greek debt swap may go through, speculation remains high and bonds remain in demand.”

The economic outlook was also downbeat after the secretary-general of the Organization of the Petroleum Exporting Countries, Abdalla Salem el-Badri, said Monday that global demand for oil was rising less than expected, Bloomberg News reported. Oil prices in New York fell more than 2.4 percent to $85.81.

“We have risk aversion, profit taking and a stronger dollar on the back of the ongoing concerns both in Europe and domestically,” said Peter Cardillo, chief market economist for Rockwell Global Capital.

Niki Kitsantonis contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=5c68dd948279b09f6a7d607ccfd6b88f

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