October 25, 2020

Jobs Data Is Strong, but Not Too Strong, Easing Fed Fears

New jobs data on Friday offered hope for this elusive middle ground in the economy, as the Federal Reserve wrestles with when to ease its stimulus efforts without endangering the recovery and the markets.

The pace of job creation in June was sufficient to please investors and keep the central bank on course to slowly begin pulling back on its major bond-buying program this fall. But the job gains were muted enough to calm worries of an abrupt exit by the Fed, a fear that has weighed on the markets lately.

The employment report, which showed the economy added 195,000 jobs, was the first since the Fed chairman, Ben S. Bernanke, said in June that policy makers were ready to begin tapering the stimulus later this year if the labor market continued to improve. The jobless rate was unchanged, at 7.6 percent.

The timing of the Fed action is critical. The central bank’s program of buying $85 billion a month in Treasury securities and mortgage-backed bonds has not only kept long-term interest rates low for borrowers, including big companies as well as individual home buyers, it has also helped prop up Wall Street.

The possibility that the Fed might move more quickly than expected to dial back the program has prompted investors to sell both stocks and bonds in the last six weeks and has raised rates on mortgages and other loans.

Buoyed by the promise of moderate economic growth and a slow but steady tapering on the part of the Fed, traders pushed the stock market higher on Friday, with major indexes gaining about 1 percent.

The 195,000 jobs added in June was significantly above the 165,000 monthly pace analysts had been expecting. And the government sharply revised upward figures for job gains in April and May, increasing the average monthly gain in the first half of 2013 to 202,000 jobs.

But the picture painted by the data hardly reflected a booming economy.

The unemployment rate, which is based on a different survey from the one that tracks job creation, remained stuck at 7.6 percent, far higher than the historical pattern for this stage of a recovery. Other measures of joblessness actually rose, with the broadest one that includes workers forced to accept part-time positions jumping to 14.3 percent, from 13.8 percent.

“Beyond the headline numbers for job growth, it gets a little more mixed,” said Jan Hatzius, chief economist at Goldman Sachs. “There is still a lot of slack in the labor market.”

Although the economy has held up better than some analysts expected in the face of tax increases and automatic cuts in federal spending this year, overall growth in economic output has also been tepid. The economy grew at an annual rate of 1.8 percent in the first quarter, short of what’s needed to quickly lower the unemployment rate.

Still, the job figures for June were enough to prompt Mr. Hatzius and other leading economists on Wall Street to predict that the Fed could announce a shift in policy in September, rather than waiting until December.

“This was a solid report and it will be seen by the Fed as fully consistent with tapering in September,” said Dean Maki, chief United States economist at Barclays.

In addition, Mr. Maki noted, average hourly earnings rose 2.2 percent year-over-year, a pace that is near a high for this recovery. Before setting a firm date, Fed policy makers will be closely watching to see if the job market maintains momentum through July and August. “It’s not a done deal in September, just more likely,” Mr. Hatzius said.

That was benign enough for traders on Friday. The Standard Poor’s 500-stock index rose 16.48, or 1.02 percent, to 1,631.89, while the Dow Jones industrial average jumped 147.29, or 0.98 percent, to 15,135.84, and the Nasdaq gained 35.71, or 1.04 percent, to finish the day at 3,479.38.

In the bond market, interest rates moved higher, as investors dumped debt on anticipation of faster growth and quicker Fed action. The 10-year Treasury note fell 1 30/32, to 91 17/32, while its yield jumped to 2.74 percent, from 2.50 percent late Wednesday.

The Fed’s stance has bolstered long-term rates, but the central bank is expected to keep short-term rates low at least until 2015.

Article source: http://www.nytimes.com/2013/07/06/business/economy-adds-195000-jobs-as-unemployment-rate-remains-at-7-6.html?partner=rss&emc=rss

Economix Blog: Live Updates on the Fed Announcement

Markets are in a state of almost eerie calm as investors await the Federal Reserve statement.

Through early afternoon, the major stock indexes were trading within 0.2 percent of Tuesday’s close. Traders have talked about saving up their firepower to respond to the Fed later in the day. A note from RBS strategists said that the markets they were watching “were very narrow as we wait for today’s Fed meeting.”

This is a sharp departure from the volatility in the markets over the last few weeks, as investors have furiously tried to divine the Fed’s future intentions and prepare their portfolios for any change.

Since Mr. Bernanke said on May 22 that the central bank could look at changing policy “in the next few meetings,” the Standard Poor’s 500-stock index has had five days with at least a 1 percent move.

On days when it appeared that the Fed might be preparing to pull back on the stimulus, stocks have generally sold off, while indications that the Fed might continue on with the stimulus have led markets up. The swings back and forth have left the benchmark index down slightly from where it was on May 22.

Some of the most serious action has been taking place in the bond markets, which are particularly sensitive to the possibility that the Fed could step back from its purchases of government and mortgage bonds. The yield on the 10-year Treasury note, which goes up when investors sell bonds, has risen from 1.6 percent in early May to 2.2 percent on Tuesday. This has pushed up mortgage rates, which has already driven down the number of homeowners refinancing their mortgages.

Much of the activity has been about preparing for what the Fed’s statement will say, and how Mr. Bernanke will explain it in his news conference. If Mr. Bernanke gives any indication that the Fed is looking at “tapering” its bond purchases, stocks and bonds are expected to sell off.

There are also some hopes that Mr. Bernanke will provide clarity about whether he plans to leave the Fed when his term runs out in January, which would probably influence the future direction of Fed policy.

Nathaniel Popper

Article source: http://economix.blogs.nytimes.com/2013/06/19/live-updates-on-the-fed-announcement/?partner=rss&emc=rss

Stocks and Bonds: European Banks Appear Wary of Lending to Each Other

Opinion »

Greenhouse: Thinking About the Court

For most justices, most of the time, the relationship between ideology and outcome is oblique.

Article source: http://feeds.nytimes.com/click.phdo?i=09d3eb6fcc6454fbfa318f71e9bbc86b

Stocks and Bonds : Shares Rise as Europe Meets on Debt Crisis

Despite some revised earnings outlooks because of the weakness in Europe, analysts were expecting some buoyancy from the financial markets.

The three main indexes in the United States had raced more than 1 percent higher shortly after the opening on Wall Street, but then failed to sustain their gains and gyrated through much of the trading session before closing higher. The uncertain trading came after some of the steepest losses in the market in weeks on Tuesday, when the Dow Jones industrial average snapped a three-day winning streak.

On Wednesday, German lawmakers approved a proposal to more than double an emergency bailout fund, after Chancellor Angela Merkel asked lawmakers to overcome their aversion to risk and put Germany behind efforts to combat the crisis.

But European leaders worked into the night Wednesday as they tried to find a solution to the debt crisis.

“Everyone is clearly in wait-and-see mode for the outcome of today’s summit,” Edel Tully, an analyst with UBS, said in a research note.

The deal being discussed late Wednesday in Brussels included a restructuring of Greek debt, an injection of new capital into European banks and the expansion of the bailout fund.

While Europe’s leaders said they had made some progress last weekend on measures aimed at addressing their financial and economic problems, expectations were not high for any firm or quick resolution.

“Modest expectations,” said Stephen Wood, Russell Investments chief market strategist, ahead of the European Union meeting. “Now if the market could just get an outline of a solution, an outline of the difficult decisions, there could be a positive reaction in the markets.”

The Dow was up 1.39 percent, or 162.42 points, at 11,869.04, and the S. P. rose 1 percent to 1,242. The Nasdaq composite index was up about 0.46 percent at 2,650.67.

The gains in the Dow were helped by a more than 4 percent rise, to $66.56, in shares of Boeing, which said that its third-quarter earnings had topped estimates. It also projected that its new 787 Dreamliner would earn a low, single-digit profit from the sales of the first 1,100 planes.

The United States 10-year Treasury bond yield rose to 2.21 percent, from 2.11 percent on Tuesday. The price fell 26/32 to 99 9/32.

The Euro Stoxx 50 index of euro zone blue chips closed 0.4 percent lower, while stocks in France, Germany and Britain were mixed.

Financial stocks in particular have borne the brunt of uncertainty in Europe, but on Wednesday, financial stocks were up nearly 2 percent.

Corporate results had an impact on major sectors. Companies dependent on consumer spending slipped less than 1 percent, weighed down by a 12.6 percent decline in the share price of Amazon to $198.40. The online retailer reported Tuesday that its operating income for the quarter had fallen 71 percent from 2010.

Energy stocks were up more than 2 percent. Valero Energy rose more than 15 percent on unattributed reports of possible bids for the company. Investors also weighed the potential impact of economic data on domestic growth. Durable goods orders fell in September because of a decline in aircraft orders, but the component used as a gauge for business equipment investment, or nondefense capital goods orders, rose 2.4 percent compared with the previous month, a report by the Commerce Department said on Wednesday.

The rise in business investment suggested that third-quarter gross domestic product growth has accelerated to an annual rate of 3.2 percent, economists with Capital Economics estimated.

Another report dealing with the housing sector showed that new single-family home sales rose by 5.7 percent from August to September, to about 313,000, the highest pace since April. But the median price fell to $204,400 from $210,900 in August.

“U.S. growth is well below potential, and the structural issues in the housing and labor markets may take years to resolve,” said Cliff Waldman, an economist for the Manufacturers Alliance/MAPI.

“Further, the difficult sovereign debt and banking crises in the euro zone could wreak havoc on global growth,” Mr. Waldman said.

Christopher Drew and Steven Erlanger contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=702f184cc1e4d34fa16ea5b7abba5b0b

Stocks and Bonds: Shares Close Down on Wall Street

Trade figures from the world’s two biggest economies, the United States and China, also stoked concerns over the economic outlook, ending a rally in European stocks as well.

The Dow Jones industrial average closed down 40.72 points, or 0.35 percent, at 11,478.13. JPMorgan fell 4.8 percent. Other banks also fell. Citigroup dropped 5.3 percent, Morgan Stanley 4.4 percent and Bank of America 5.5 percent.

JPMorgan is the first big American bank to announce quarterly results. Next week Wells Fargo Company, Citigroup and Morgan Stanley will report. JPMorgan is considered one of the industry’s leaders, so its results do not bode well for other financial companies, said Jason Lilly, a portfolio manager at Rockland Trust Investment Management Group.

An afternoon rally in technology stocks trimmed some of Wall Street’s losses. Yahoo rose 1 percent as investors speculated the company might be bought. The technology-focused Nasdaq composite rose 15.5 points, or 0.6 percent, to 2,620.

“There’s a mounting interest in Yahoo and that has filtered out into tech stocks,” said Quincy Krosby, a market strategist for Prudential Financial.

The S. P. 500 index fell 3.59 points, or 0.3 percent, to 1,203.66. Financial stocks fell 2.4 percent, the most of the 10 company groups that make up the index.

Investors were also disappointed by a report that China’s trade surplus narrowed for a second month in September. That suggests the Chinese economy is slowing more than previously thought, which could hurt demand for exports from the United States.

The United States trade deficit was essentially unchanged in August at $45.6 billion, with exports and imports both slipping. Lower imports are a bad sign for the United States economy, since it shows weakness in demand.

Before Thursday, stocks had soared for a week on signs that Europe was starting to get a handle on its financial crisis. The Dow had rallied 8.1 percent since last Tuesday, when it hit its lowest point of the year. The S. P. Poor’s 500-index rose even more in that time, 9.8 percent. That was the biggest seven-day jump for the S. P. since March 2009, when the market hit 12-year lows.

The sharp highs and lows are typical of the volatility that has plagued markets since August, when investors began reacting to fears that indebted economies in Europe would collapse and the United States would slide back into recession. Many analysts say they think the market is in for more big swings until a resolution to Europe’s debt is reached.

“Europe will definitely contribute to more volatility. That story isn’t done,” said Mr. Lilly.

In corporate news, the BlackBerry maker Research in Motion fell 1.13 percent after a three-day outage that cut off service to users across the world. The company said it fixed the problem, which resulted from a breakdown in its European infrastructure.

The Blackstone Group lost 5.4 percent after a Citi Investment Research analyst dropped the private equity firm from a list of favorite stocks, saying the firm would not be able to make strong real estate investments for some time because of the weak economy.

Netflix rose 3 percent after the company secured a deal with Warner Brothers Television Group and CBS to stream programs from the CW television network.

The Treasury’s 10-year note rose 8/32, to 99 16/32. The yield fell to 2.18 percent, from 2.21 percent late Wednesday.

In Europe, Britain’s FTSE 100 closed down 0.7 percent, while Germany’s DAX and France’s CAC 40 were both 1.3 percent lower.

Oil prices meanwhile tracked European equities lower — benchmark oil was down $1.33 to $84.45 a barrel in electronic trading on the New York Mercantile Exchange.

Article source: http://feeds.nytimes.com/click.phdo?i=359a05ef31ba9c3e7541b50a9aebf627

Stocks and Bonds: Worry on Euro Debt Ends 3 Days of Gains

Raw materials companies helped depress the major indexes after prices for commodities like copper and oil plunged.

Traders focused on remarks by Chancellor Angela Merkel of Germany suggesting that the second bailout package for Greece might have to be renegotiated. Several European leaders want banks to take bigger losses on Greek bonds, but France and the European Central Bank oppose the idea.

Germany’s Parliament is set to vote Thursday on a measure that would give a European rescue fund more powers to fight the region’s debt crisis. Finland’s Parliament approved the proposal Wednesday, lifting some uncertainty over the crisis, which has dogged financial markets since late July.

“This is a market that has been fluctuating and is thoroughly susceptible to any news, any rumors, any innuendos” about Europe, said Quincy Krosby, a market strategist at Prudential Financial.

The Dow Jones industrial average fell 179.79 points, or 1.6 percent, to close at 11,010.90. It had gained 413 points over the last two days. The Standard Poor’s 500-stock index fell 24.32, or 2.1 percent, to 1,151.06. The Nasdaq composite index fell 55.25, or 2.2 percent, to 2,491.58.

Declines were broad. Only 17 of the 500 stocks in the S. P. 500 rose.

Raw materials stocks were down 4.5 percent. Investors fear that Europe’s problems could cause another global recession, weakening demand for basic materials like copper. The price of copper plunged 5.6 percent; crude oil fell 3.8 percent, to $81.21 a barrel..

The mining company Freeport-McMoRan Copper and Gold declined 7.2 percent, and Cliffs Natural Resources fell 8.4 percent. The coal producer Alpha Natural Resources was down 11 percent, the most of any company in the S. P.

Orders for durable goods slipped 0.1 percent last month. The modest decline was largely a result of an 8.5 percent drop in orders for automobiles and automobile parts.

Economists looked past the total figure and focused on a 1.1 percent increase in a crucial category that measures business investment plans. That is core capital goods that are not used for defense or transportation.

Shipments of those goods rose 2.8 percent, the fourth consecutive gain in the category. The government looks closely at shipment figures when calculating economic growth.

Economists said the fact that businesses kept expanding and modernizing during the turbulent month suggested many were confident about the future.

“Business capital spending is rising,” said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi in New York. “There is no recession.”

The Dow jumped 126 points minutes after the opening bell on that report. But those gains were gone within an hour, and the selling intensified in the last half-hour of trading.

The decline followed three days of gains. Stocks rose earlier this week on hopes that Europe was moving closer to resolving its debt problems. The Dow soared 272 points on Monday, its fourth-largest increase this year, and 147 points more on Tuesday.

“The market got ahead of itself,” said Joseph Saluzzi, co-head of stock trading at Themis Trading. Investors “assumed some kind of deal would be structured, and that was so far away from happening.”

Technology companies fared better than the overall market. The online retailer Amazon.com shot up 2.5 percent after it unveiled the Kindle Fire, a tablet device that will cost $199 and will compete with Apple’s hugely successful iPad.

Jabil Circuit, an electronics parts maker, rose 8.4 percent. The company reported strong earnings and a fourth-quarter earnings forecast that was better than analysts had expected.

The benchmark 10-year Treasury note fell 2/32 to 101 8/32, pushing its yield to 1.99 percent, down from 1.98 percent on Tuesday.

Article source: http://www.nytimes.com/2011/09/29/business/daily-stock-market-activity.html?partner=rss&emc=rss

DealBook: Europe Readies Plan for Tax on Financial Transactions

José Manuel Barroso, the president of the European Commission.Jonathan Fickies/Bloomberg NewsJosé Manuel Barroso, the president of the European Commission.

6:09 p.m. | Updated

BRUSSELS — The European Commission is expected to unveil a detailed plan on Wednesday to create a financial transaction tax, despite the opposition of several member countries and a formal acknowledgement that it could have a significant negative effect on the European Union’s gross domestic product.

The plan, which has the strong support of France and Germany, will be discussed in a speech before the European Parliament in Strasbourg, France, by José Manuel Barroso, the president of the commission, the executive arm of the European Union.

The measure will probably include taxes on the purchase of stocks and bonds; derivatives will probably be taxed at a lower rate. Transactions on the currency markets are not expected to be included.

Critics are expected to highlight a formal study regarding the proposal’s economic effects.

“With a tax rate of 0.1 percent, the model shows a drop in G.D.P. (minus 1.76 percent) in the long run,” according to a draft of the plan.

Related Links

One European Union official, who asked not to be identified because the proposal had not been published, said the actual effect would be less significant, because the assumptions used in the final proposal differed from those in an impact study.

He also suggested that the tax rate proposed on at least some transactions might be lower than 0.1 percent, and that the proposal would exempt the purchase of stocks and bonds when they were first issued. The impact study had assumed the tax applied to all transactions, he said.

Nevertheless, the proposal is highly divisive. France and Germany see it as a method of requiring the financial sector to provide compensation for some of the damage sustained in the economic crisis. They also think the tax can help deter more speculative transactions, which may provide little benefit to the real economy.

“The basic idea is that taxes could improve financial sector stability and the functioning of the market,” the draft proposal says.

But Sweden and Britain are among those in opposition, saying that unless the levy can be adopted globally, the measure will simply drive financial institutions away from the European Union.

Prospects of a global deal were quashed earlier this month when the United States Treasury secretary, Timothy F. Geithner, told European finance ministers he would not agree to such a tax in the United States.

After Mr. Geithner’s comments, Belgium’s finance minister, Didier Reynders, called for Europeans to press ahead with their own proposal, perhaps including only the 17 nations that use the euro, if all 27 members of the European Union could not agree.

If a euro zone agreement is impossible, a smaller group of countries could go ahead with their own low-level tax.

The Swedish finance minister, Anders Borg, explained this month the opposition of his country, which does not use the euro.

“We have substantial experience in Sweden,” he said. “Basically, most of our derivative and bond trading went to London during the years we had a financial transaction tax, so if you don’t get a solution that is universal, it is very likely to be detrimental for European financial markets.”

The European Union official declined to say what tax rate would be proposed. In the past, the European Commission has suggested a rate of 0.1 percent for trading stocks and bonds and 0.01 percent for derivatives.

Article source: http://dealbook.nytimes.com/2011/09/27/europe-readies-plan-for-tax-on-financial-transactions/?partner=rss&emc=rss

Stocks and Bonds: Stocks Decline a Day After Fed Sets Latest Stimulus Measure

Several factors contributed to the heightened gloom, including new signs of political paralysis in Washington, Europe’s continued failure to resolve its debt crisis and indications of economic stress in developing countries that had been strong.

While the Fed’s measures to lower interest rates could increase growth a bit, some economists worry that the scale of the problems call for more stimulus efforts globally, but other countries are not cooperating.

With investors so nervous, the markets may rebound over the next few days, as volatility and big swings of 3 and 4 percent have become more common. On Thursday a downcast mood appeared across the board. Stocks plunged about 5 percent across Europe and in Hong Kong, and more than 3 percent in the United States.

“Today, we really seem to be stuck in a negative spiral,” said Matthias Jasper, head of equities at WGZ Bank in Düsseldorf. “Investors just want to keep their exposure low and watch from the sidelines.”

The Standard Poor’s 500-stock index flirted with a bear market, generally a 20 percent decline from a recent peak, but recovered in the final hour and closed down 17 percent to 1129.56 from a late April high. The MSCI All-Country World Index, a grouping of 45 countries, however, fell more than 20 percent, pushing it into bear territory.

Financial markets beyond stocks also reflected growing anxiety. Commodities like oil fell, and even gold dropped sharply in price. As investors continued to seek havens, United States bond prices soared for a fifth consecutive trading session, pushing the 10-year benchmark yield to a new low of 1.72 percent.

The cost of insuring the government bonds of Western European nations against default rose to a record high. The extra yield investors demand to hold Italian government debt also rose, pointing to lingering worries about debt levels in the euro currency region. Despite steps taken last week by central banks to help banks in Europe borrow dollars, there were signs of rising borrowing costs for these institutions.

It is not only economies in the United States and Europe that are faltering. Financial markets in developing countries are showing levels of stress last seen during the financial crisis, a senior World Bank official said Thursday.

The official said that problems in the developed world increasingly were shaking the economies of developing nations, not because of a drop in trade flows or capital investment, but because a sense of gloom was spreading around the world, shaking the confidence of domestic investors.

“We are increasingly worried about the possibility of global contagion,” said the official, who shared the World Bank’s assessment of the global situation on condition of anonymity.

“At some point the global mood changes. Just like the realization that even big banks are vulnerable” shook world markets in 2008, the official said, “the idea that even the U.S. is vulnerable means that many investors have lost an anchor.”

The market downturn was set in motion on Wednesday after the Fed announced that a complete economic recovery was still years away, adding that the United States economy has “significant downside risks to the economic outlook, including strains in global financial markets.”

The Fed also announced it would buy long-term Treasury bonds and sell short-term bonds to help stimulate lending and growth.

Some analysts were disappointed the Fed did not act more forcefully and they had little faith that policy tools like lower interest rates were encouraging consumers and businesses to spend more or to start creating jobs.

“The initial and follow-up reaction from the equity market is likely the realization that the Fed has little left to offer, that Washington is a mess, and their only hope is to ‘ride it out’ over a long period of time,” said Kevin H. Giddis, the executive managing director and president for fixed-income capital markets at Morgan Keegan Company.

The policy conundrum is illustrated by the fact that despite lower rates people are not taking up new mortgages or refinancing existing ones. Rates on 30-year fixed mortgages dropped after the Fed’s announcement, falling to 4.05 percent from 4.21 percent on Wednesday, according to HSH.com, which publishes mortgage and consumer loan information.

But the number of new mortgage applications is running at the lowest level since August 1995, according to the Mortgage Bankers Association. Guy Cecala of Inside Mortgage Finance, which monitors mortgage activity, said the volume of new mortgages this year would probably be about $1 trillion, down from $1.5 trillion in 2010, which was already anemic.

Companies, too, are holding back on spending even though they have built cash reserves to 6 percent of their total assets, the highest level since at least 1952, according to Credit Suisse.

Matthew Saltmarsh and Binyamin Appelbaum contributed reporting.

Article source: http://www.nytimes.com/2011/09/23/business/global/daily-stock-market-activity.html?partner=rss&emc=rss

Stocks and Bonds: Markets Stumble on Debt and Deficit Worries

Financial stocks led Wall Street lower on Monday and European stocks fell more than 1 percent.

In Europe, on the first day of trading after the publication of the stress tests late Friday, the euro weakened and the bond yields of indebted nations climbed as investors worried about the degree of political will to overcome the region’s debt crisis.

The euro weakened to $1.4109 from $1.415 late Friday. The market worries came at the start of an important week for the European Union as its leaders try to stem full-blown market contagion.

The leaders will hold a special summit meeting Thursday, but there appears to be no agreement yet over the terms of a second bailout for Greece, especially on the nature of a private sector contribution.

The lack of clarity along with recent investor sales of Italian and Spanish bonds have led analysts to become increasingly pessimistic.

“The euro zone crisis has recently worsened significantly, exacerbated by disagreements between the E.U.’s key politicians,” said Ruth Lea, an economic adviser to the Arbuthnot Banking Group in London. “It is becoming increasingly clear that there will have to be major steps towards fiscal union or the euro zone will begin to disintegrate.”

Investors also remained wary about events in the United States, where President Obama is trying to get lawmakers to agree to a deficit-reducing package before an Aug. 2 deadline for increasing the debt ceiling.

“People are very concerned about the length of the process in the debt-ceiling debate,” said Russell Price, a senior economist with Ameriprise Financial, adding that there were also concerns about contagion in the euro zone debt crisis.

On Wall Street, financial shares, which fell more than 1.3 percent, led the broader market down. The Dow Jones industrial average dropped 94.57 points, or 0.76 percent, to 12,385.16.

The Standard Poor’s 500-stock index lost 10.70 points, or 0.81 percent, to 1,305.44, and the Nasdaq composite index was down 24.69 points, or 0.89 percent, to 2,765.11.

Bond prices were also down. The Treasury’s 10-year note declined 6/32, to 101 21/32. The yield rose to 2.93 percent, from 2.91 percent late Friday.

In the United States, the News Corporation, which is in the midst of a deepening scandal, fell more than 4 percent, to $14.97. Banks fell, with Citigroup down 1.67 percent, to $37.74, and Bank of America down 2.8 percent, to $9.72. But some analysts said that Europe was the main driver of the down market. Some relatively positive corporate earnings, however, helped offset the negative sentiment in the United States.

“I think it is kind of a tug of war,” said James W. Paulsen, the chief investment strategist for Wells Capital Management. “You look at Europe, and then we are in the midst of a pretty good earnings seasons.”

But analysts also noted a flight to precious metals, including gold, as the reverberations from Europe and the debt talks were gauged against the bigger picture of an uneven economic recovery.

The price of gold for September delivery rose above $1,600 an ounce, as investors sought safer assets. And crude oil rose $1.35 a barrel, to $96.25.

Economists for Goldman Sachs reported after the market closed on Friday that they were cutting their outlook for real United States economic growth in the near term, to 1.5 percent in the second quarter from 2 percent, and to 2.5 percent in the third quarter from 3.25 percent.

In Europe,

further clouding the picture were the stress tests on the region’s banks carried out by regulators. Of the 90 banks tested, eight failed, with an aggregate capital shortfall of 2.5 billion euros. But the exercise left unanswered many questions about how many healthier lenders would survive a deepening of the debt crisis, given their exposure to Greek, Italian and Spanish bonds. A sovereign default case was excluded from the tests.

The Euro Stoxx 50, a benchmark index of blue-chip stocks in the region, closed down 1.98 percent on Monday, and the CAC 40 in Paris lost 2.04 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=bbc643d90658246a6082c95317201657

Stocks and Bonds: U.S. Stocks Tumble as Concern Over Europe’s Debt Crisis Heightens

Treasury prices and the dollar rose. Asian and European shares were lower after developments in Greece, Spain and Italy refocused attention on the euro zone’s fiscal uncertainty. Manufacturing statistics released by Germany and China were softer than forecast, raising the prospect of slower growth in Europe and in China, which has the world’s second-largest economy, and unsettling investors.

“It is a bit of a risk-off environment right now,” said Eric Viloria, senior technical strategist for Forex.com. “Markets are risk-averse, and the U.S. dollar is benefiting.”

The Dow Jones industrial average fell 130.78 points, or 1.05 percent, to 12,381.26, its lowest close since April 19. The Standard Poor’s 500-stock index was down 15.90 points, or 1.19 percent, at 1,317.37. The Nasdaq was down 44.42 points, or 1.58 percent, at 2,758.90

Materials, energy, industrials, utilities, financials and information technology tumbled by about 1 percent.

Caterpillar fell about 2.34 percent, to $101.89, and General Electric was 1.17 percent lower at $19.39. Energy stocks tumbled, with Halliburton falling 2.16 percent, to $46.16, Exxon Mobil down 1.1 percent at $80.67, and Schlumberger down 1.7 percent at $82.08.

Citigroup was more than 2 percent lower at $40.16, while Bank of America was lower by 1.38 percent at $11.42. JPMorgan Chase fell more than 1.3 percent to $42.55.

In Asia, the Nikkei index fell by more than 1.5 percent and the Hang Seng was down by just over 2 percent. The Shanghai index was lower by 2.9 percent.

In Europe, the CAC 40 closed down by 2.1 percent, the DAX in Germany was 2 percent lower, and the FTSE ended the day down by 1.9 percent.

Analysts said recent news from Europe had not instilled confidence in the Continent’s ability to handle its fiscal challenges. Last week, Fitch Ratings downgraded Greece’s credit ratings by three levels to B+, a rating that is below investment grade. Standard Poor’s lowered its outlook on Italy’s debt to negative from stable over the weekend, citing a weaker outlook for growth and lower prospects for the country’s ability to trim its debt.

And Spain made headlines after its Socialist Party lost on Sunday in regional and municipal elections as tens of thousands of Spanish protesters, their anger partly fueled by the debt crisis and joblessness, are trying to force an overhaul of the political system.

Declines in Asia’s markets followed the HSBC preliminary purchasing managers’ index reading, a gauge of the manufacturing sector activity, for China, which fell to a 10-month low of 51.1 in May, according to news agencies, signaling a slowdown in expansion. Still, the Chinese government is poised to continue fiscal tightening. A similar gauge for Germany dropped to 54.9 in May, below forecasts.

The financial services and valuations company, Markit, said on Monday that its manufacturing P.M.I. for the euro zone was at a seven-month low at 54.8 in May, the sharpest slowdown since just after the collapse of Lehman Brothers in 2008, according to Chris Williamson, the chief economist.

While the numbers could have been affected by seasonal factors like the timing of Easter this year or by supply chain disruptions from the disasters in Japan, they show a “more fundamental slowing in the pace of economic growth,” he said in a statement.

Bruce McCain, the chief investment strategist of Key Private Bank, said the signs of weaker economic activity in China were counterbalanced by high inflation, with the possibility that they would have to continue to raise rates.

In Europe, he added, “not only are they again grappling with the sovereign debt issue, but inflation remains uncomfortably high and they seem determined to raise rates again.”

Treasury prices rose on Monday. The Treasury’s benchmark 10-year note rose 5/32, to 99 31/32 , and the yield fell to 3.13 percent from 3.15 percent late Friday. The yield has fallen by more than 40 basis points in a little more than a month.

Concerns over Europe reawakened the potential for oil demand to decline, causing crude prices on Monday to slip.

The dollar was higher against a range of currencies, with the euro falling below $1.40.

“Certainly while there is concern about the dollar’s secular decline we have to be encouraged that it is still seen as a strong currency,” said Colleen Supran, a portfolio manager with Bingham, Osborn Scarborough, which is based in San Francisco.

Article source: http://feeds.nytimes.com/click.phdo?i=527f473dde60be9d1aa82c6940a63b01