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Stocks Decline on Fiscal Concerns in U.S. and Europe

November 14, 2012 by Leave a Comment

Stocks on Wall Street closed lower on Tuesday, as fears about fiscal battles in Washington and the troubles in Greece tipped major indexes from gains to losses throughout the day. A surge in shares of Home Depot prevented a steeper drop for the Dow Jones industrial average.

The Dow closed down closed down 58.90 points, or 0.5 percent, at 12,756.18. It would have been lower without support from Home Depot, whose stock jumped 3.6 percent after the company beat expectations for its fiscal third-quarter earnings. Home Depot is benefiting from the gradual housing recovery and rebuilding efforts after Hurricane Sandy. Its stock rose $2.22 to $63.38.

Stocks had opened lower after European leaders postponed the latest aid package for Greece. The Dow turned positive in the first hour of trading and rose solidly through the morning, gaining as much as 83 points. Starting around 2 p.m., the average slid steadily into the red.

Other indexes also closed lower. The Standard Poor’s 500-stock index lost 5.50 points, or 0.4 percent, to 1,374.53. The Nasdaq composite index fell 20.37 points, or 0.7 percent, to 2,883.89.

Investors are trading against the backdrop of federal spending cuts and tax increases that will take effect automatically at the beginning of next year unless United States leaders reach a compromise before then.

Worries about this possibility pushed United States stocks to one of their worst weekly losses of the year last week after voters re-elected President Obama and a deeply divided Congress. Mr. Obama met on Tuesday with labor leaders and others who advocate higher taxes on the wealthy and want to protect health benefits for seniors and other government programs. The president will meet with business leaders Wednesday.

“The longer we sit and do nothing” about the nation’s fiscal issues, “the more this market is going to oscillate between positive 40 and negative 60, until we know what’s going to happen next with all this uncertainty,” said Craig Johnson, senior technical research strategist with Piper Jaffray Company in Minneapolis.

Mr. Johnson says he expects the S. P. 500 to climb to 1,550 in the next six months as investors get over their lingering unease from the recent recession and companies understand better how government policy on taxes, health care and spending will affect them.

European stocks had been lower but rose after trading opened in New York. Benchmark indexes in France, Britain and Germany closed modestly higher.

Traders in Europe are concerned because finance ministers, in a surprise, postponed $40 billion in aid desperately needed for Greece. A day earlier, there was word that leaders had prepared a positive report on Greece, making it appear likely that the aid would be released.

“It’s a little bit like ‘Groundhog Day,’ ” said Nicholas Colas, chief market strategist at the ConvergEx Group, referring to the movie whose protagonist, played by Bill Murray, must relive the same day over and over. Until there is decisive news from Washington or Brussels, neither of which appears imminent, markets will remain vulnerable to short-term swings caused by headlines, Mr. Colas said.

The next major catalysts for a market move, he said, will be gauges of spending by consumers on the traditional shopping rush on the day after Thanksgiving.

The Treasury’s benchmark 10-year notes rose 7/32, to 100 9/32, while the yield slid to 1.59 percent, from 1.61 percent late Friday, as demand increased for ultrasafe investments. The United States bond market was closed on Monday in observance of the Veterans Day holiday.

Article source: http://www.nytimes.com/2012/11/14/business/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Stocks & Bonds: U.S. and European Markets Rise on Optimism Over Greek Vote

June 30, 2011 by Leave a Comment

A relief rally swept the European and American markets after an early Wednesday vote by the Greek Parliament to approve an austerity plan.

The plan was passed, a condition set by international lenders for providing more financing and preventing a default, after weeks of uncertainty in financial markets related to the debt problems in the euro zone.

Investors had been bracing for the Greek Parliament’s decision on the package, which includes unpopular wage cuts, tax increases and privatizations. While investors got some relief with the announcement that it had passed, analysts warned that unresolved fiscal issues remained.

“Today’s vote will certainly give some short-term relief to markets, but concerns about the long-term feasibility of Greece’s fiscal plans still remain in place,” said Diego Iscaro, an IHS Global Insight senior economist, in a research note after the vote.

Protests continued outside the Parliament building in Athens. A second vote was scheduled for Thursday on enabling legislation to set the timing of the privatizations, especially of Greece’s state-owned electric utility.

With so much anticipation before the vote, analysts said that by the time it took place, investors had fixed positions.

“This is classic ‘buy the rumor, sell the news,’ ” said Phil Orlando, chief equity market strategist at Federated Investors. “The equity market was up in anticipation. We priced it in ahead of time.”

Still, the news was enough to lead major indexes higher. The DAX index in Frankfurt closed up 1.7 percent at 7,294.14, while the FTSE 100 in London rose 1.5 percent to 5,855.95.

In the Asia-Pacific region on Thursday, the reaction was muted, with the Nikkei 225 flat by the midday break in Tokyo. On Wednesday, the Nikkei had risen 1.5 percent on optimism that the Greek Parliament would pass the austerity measures.

Stocks in South Korea edged up 0.3 percent on Thursday, and Singapore and Taiwan climbed 0.7 percent. In Hong Kong, the Hang Seng index was 1.7 percent higher by midmorning.

In the United States, the Dow Jones industrial average closed up 72.73 points, or 0.60 percent, at 12,261.42. The Dow has now risen every day this week, putting it up 326.84 points, or 2.74 percent, in that period.

The Standard Poor’s 500-stock index was up 10.74 points, or 0.83 percent, at 1,307.41 and the Nasdaq composite index was up 11.18 points, or 0.41 percent, at 2,740.49.

The Treasury’s 10-year note fell 24/32, to 100 1/32. The yield rose to 3.12 percent, from 3.03 percent late Tuesday.

Bank stocks helped lift the Dow, and Bank of America was the most actively traded in the broader markets’ financial sector, which rose more than 2 percent. Bank of America, which said it would set aside $14 billion to pay investors who bought securities it assembled from mortgages that later soured, rose nearly 3 percent to $11.14. The company said it expected the agreement to lead to a second-quarter loss of $8.6 billion to $9.1 billion.

Citigroup was up more than 3 percent at $41.50. Morgan Stanley rose 4.75 percent to $23.39.

Other sectors that forged ahead were materials and energy, which each closed more than 1 percent higher. Oil closed up $1.88 at $94.77.

Yields on benchmark 10-year Spanish, Portuguese and Greek bonds declined, while those in safer equivalents issued by Germany and France rose, indicating investors were willing to switch back into riskier securities.

 The euro ended the day at $1.4431, up slightly from $1.4370 Tuesday.

The agreement by Greek lawmakers on the austerity measures was a crucial step in the international rescue of the crippled economy, and the relatively muted market reaction to the vote showed that investors knew that the country’s financial troubles were far from over.

“What’s really important is not the vote itself,” said George Magnus, senior economic adviser at UBS in London, “but the implementation of what they’re voting on, and that’s where the programs will come unstuck.”

The vote was critical to unlocking near-term financing, specifically the disbursement of the fifth installment of the original 110 billion euro bailout for Athens (roughly $140 billion when agreed to last year).

That installment would be worth 12 billion euros and would enable Greece to meet obligations like bond coupon payments in July, while paving the way for a new international lending program to provide financing through 2014.

Euro area ministers are expected to provide details of the program on July 3.

In a research report released Tuesday, Citigroup analysts said: “Despite the aid package, eventual Greek haircuts may be inevitable, with estimated private sector haircuts of 65 to 77 percent,” referring to the write-downs that bond holders will be required to accept.

“In other words, a bailout package addresses the liquidity issue much more than the solvency issue,” Citigroup said.

Two Commerzbank analysts, Benjamin Schröder and Peggy Jäger, said early Wednesday that “even if the bills are passed, worries could still linger on for longer, if no broader consensus across Greek political parties forms.”

Bettina Wassener contributed reporting from Hong Kong.

Article source: http://feeds.nytimes.com/click.phdo?i=e87656d09a002edd4e1dc496c875f276

Filed Under: Business News Tagged With: , ,

Asian Shares Fall, but European Indexes Rebound

April 19, 2011 by Leave a Comment

But shares rebounded in Europe on Tuesday, after a sharp decline that was caused by more worries about the Continent’s sovereign debt, and a decision by Standard Poor’s, the credit ratings agency, to lower its outlook on the United States from stable to negative on Monday because of the country’s high budget deficits and rising government indebtedness.

The S.P. also cited the “material risk that U.S. policy makers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013.”

The agency did not actually downgrade the American credit rating, and government officials in Japan on Tuesday voiced their support of the United States.

“The United States is tackling fiscal issues in various ways, so I still think U.S. Treasuries are basically an attractive product for us,” said Finance Minister Yoshihiko Noda of Japan, Reuters reported.

Still, S.P.’s statement sent brief jitters through the Treasury bond markets and spooked Wall Street, with the Dow Jones industrial average falling 1.1 percent Monday.

The markets in the Asia-Pacific region followed suit on Tuesday.

In Japan, which is still struggling amid the turmoil caused by the disastrous earthquake and tsunami last month, the Nikkei 225 index fell 1.2 percent to close at 9,441.03 points.

Taiwan dropped 0.9 percent, South Korea fell 0.7 percent lower, and in Australia, the SP/ASX 200 index closed down 1.4 percent.

The Hang Seng in Hong Kong sagged 1.3 percent, while the key index for mainland China dropped 1.9 percent.

In India, the Sensex index fell 0.3 percent during the afternoon.

Major indexes across Europe, however, were at least half a percent higher. The FTSE 100 in London was up 0.6 percent, while the DAX rose 0.4 percent. The CAC-40 in France was 0.76 percent higher.

Despite the fundamentally good economic backdrop in many of the fast-growing Asian economies, investors are increasingly fretting about how policy makers will act to contain the mounting inflation that is plaguing much of the region.

The United States’ fiscal deficit and debt problems “are not the U.S.’s alone,” analysts at DBS in Singapore wrote in a research note on Tuesday.

“The rest of the world needs to come to terms that the U.S. can no longer sustain its role the consumer of last resort for the global economy indefinitely. Two years after the exit from the 2008 global crisis, there will be greater urgency for emerging markets, especially those with large surpluses, to focus and rely more on domestic demand for growth,” the DBS analysts commented.

Article source: http://www.nytimes.com/2011/04/20/business/global/20markets.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,