Tuesday, October 4, 2011
(Reuters) - Stock index futures fell on Tuesday, a day after equities hit
13-month lows, on increased worries about a major banking crisis in Europe and
expectations Greece would default
soon.
* Wall Street has fallen for the past two sessions and the broad S&P 500 index was on the verge of entering bear market territory.
* The STOXX Europe 600 Banking Index .SX7P sank 4 percent on Tuesday while Franco-Belgian bank Dexia (DEXI.BR) plummeted 17 percent to a record low because of its Greek exposure. European shares tumbled 2.6 percent. .EU
* U.S. banks were likely to remain in focus and continue to be pressured by the same issue. On Monday, Morgan Stanley (MS.N) closed at its lowest since December 2008.
* European finance ministers were considering making banks take bigger losses on Greek debt and delayed a vital aid payment to Athens until mid-November, setting up a crunch point in the region's sovereign debt crisis.
* S&P 500 futures fell 6.4 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures sank 81 points, and Nasdaq 100 futures lost 11.5 points.
* The benchmark S&P is down 19.4 percent and near bear market territory, which would be a 20 percent decline from its recent high set on April 29.
* Later Tuesday, U.S. Federal Reserve Chairman Ben Bernanke will testify before the Joint Economic Committee in Washington on the economic outlook.
* Data on durable goods and factory orders, both for August, will also be released at 10 a.m. EDT.
* Fast food chain operator Yum! Brands Inc (YUM.N) is on tap to report quarterly results.
* Apple Inc (AAPL.O) is expected to unveil a new version of its popular iPhone, hoping to fend off hard-charging rivals running Google Inc's (GOOG.O) Android system.
* The Dow and S&P dropped more than 2 percent on Monday, slumping to 13-month lows in heavy volume on fears Greece's debt woes could spark a full-blown banking crisis in Europe. The Nasdaq fell more than 3 percent.
* Wall Street has fallen for the past two sessions and the broad S&P 500 index was on the verge of entering bear market territory.
* The STOXX Europe 600 Banking Index .SX7P sank 4 percent on Tuesday while Franco-Belgian bank Dexia (DEXI.BR) plummeted 17 percent to a record low because of its Greek exposure. European shares tumbled 2.6 percent. .EU
* U.S. banks were likely to remain in focus and continue to be pressured by the same issue. On Monday, Morgan Stanley (MS.N) closed at its lowest since December 2008.
* European finance ministers were considering making banks take bigger losses on Greek debt and delayed a vital aid payment to Athens until mid-November, setting up a crunch point in the region's sovereign debt crisis.
* S&P 500 futures fell 6.4 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures sank 81 points, and Nasdaq 100 futures lost 11.5 points.
* The benchmark S&P is down 19.4 percent and near bear market territory, which would be a 20 percent decline from its recent high set on April 29.
* Later Tuesday, U.S. Federal Reserve Chairman Ben Bernanke will testify before the Joint Economic Committee in Washington on the economic outlook.
* Data on durable goods and factory orders, both for August, will also be released at 10 a.m. EDT.
* Fast food chain operator Yum! Brands Inc (YUM.N) is on tap to report quarterly results.
* Apple Inc (AAPL.O) is expected to unveil a new version of its popular iPhone, hoping to fend off hard-charging rivals running Google Inc's (GOOG.O) Android system.
* The Dow and S&P dropped more than 2 percent on Monday, slumping to 13-month lows in heavy volume on fears Greece's debt woes could spark a full-blown banking crisis in Europe. The Nasdaq fell more than 3 percent.
U.S. Stock-Index Futures Drop; S&P 500 May Extend One-Year Low
By Adam Haigh - Oct 4, 2011 4:56 AM ET
Futures on the S&P 500 expiring in December slid 0.2 percent to 1,084.1 at 9:54 a.m. in London, erasing earlier gains of as much as 0.7 percent. Dow Jones Industrial Average futures lost 28 points, or 0.3 percent, to 10,501.
“We are getting all these mixed macro signals,” said Peter Garnry, an equity strategist at Saxo Bank A/S, in an interview with Linzie Janis on Bloomberg Television’s“Countdown” from Hellerup, Denmark. “We still have all these issues in Europe and a very fragile banking system. It’s very difficult to predict where the market will go in either direction.”
Investors who bought S&P 500 shares three years ago and held on to the stocks have made no profit. The gauge closed at 1,099.23 yesterday, the same closing level as on Oct. 3 2008 and the benchmark measure’s lowest close since Sept. 8, 2010.
The S&P 500 came within 1 percent of extending its decline from this year’s high to 20 percent, the common definition of a bear market. Losses accelerated in the S&P 500 after the gauge fell below a series of levels considered significant by analysts who base their investment decisions on charts. The index slipped below 1,119.46, its previous lowest close of the year, just before 12:50 p.m. and breached 1,114.22, the worst intraday level from September, about 15 minutes later.
Bear Markets
Concern governments may be running out of tools to keep the global economic slowdown from worsening has left equities fromSao Paolo to Hong Kong and Frankfurt in bear markets. Bank of America Corp. (BAC) lost 9.6 percent yesterday and has slumped 59 percent in 2011. The declines have confounded bullish investors who speculated the recovery that began in March 2009 would boost stocks for a third year.Companies in the benchmark gauge for American equities trade at 9.8 times 2012 forecast earnings, compared with the average in economic contractions since 1957 of 13.7, according to data compiled by Bloomberg. At the same time, analysts have cut projections for profits next year by 2.6 percent to $110.78 a share, the biggest eight-week drop since 2009, the data show.
McGraw-Hill Cos. may move after the finance and media company that is splitting in two agreed to sell its nine television stations to E.W. Scripps Co. for $212 million.
(Reuters) Stock index futures pointed to a lower open on Wall Street on Tuesday, with futures for the S&P 500 down 0.4 percent, Dow Jones futures down 0.5 percent and Nasdaq 100 futures down 0.5 percent at 0841 GMT.
* The euro zone's blue-chip Euro STOXX 50 markets/index?symbol=de%21SX5E">.STOXX50E index was down 2.8 percent in morning trade, retracing more than 50 percent of its recent recovery rally, with Franco-Belgian bank Dexia (DEXI.BR) plummeting 24 percent to a record low.
* Belgium's finance minister, Didier Reynders, said Belgium and France stood ready to act while, according to a Belgian newspaper report, Dexia could be split up and its 'good' assets could be sold by the end of 2011.
* The bank, which was bailed out at the height of the financial crisis in 2008, has recently come under pressure over its exposure to Greece and a board meeting went on into the early hours of Tuesday in an effort to resolve its problems.
* Euro zone finance ministers are reviewing the size of the private sector's involvement in a second international bailout package for Greece, a move that could undermine the aid program and hasten the threat of a Greek default.
* Ministers also agreed after a meeting in Luxembourg that Greece could wait until mid-November to get the next installment from its existing emergency aid program, piling more pressure on the government to tackle its debt problems.
* China said it was "adamantly opposed" to a proposed U.S. bill aimed at forcing it to let the yuan rise, saying its passage could lead to a trade war between the world's top two economies.
* On the economic front, investors awaited August factory orders.
* Federal Reserve chairman Ben Bernanke testifies on the economic outlook before the Joint Economic Committee, in Washington.
* The dollar was supported near a 9-month high against a basket of currencies on Tuesday with the market gripped by fear the debt crisis in Europe could unleash substantial damage on the global economy.
* U.S. stocks dropped to a 13-month low in heavy volume on Monday as investors dumped banking shares on fears Greece's debt woes could spark a full-blown banking crisis in Europe.
* Investors pegged losses to the sharp fall in Dexia, which sank 10 percent on Monday after a Moody's warning about its liquidity due to concerns about exposure to Greece.
* The Dow Jones industrial average .DJI dropped 258.08 points, or 2.4 percent, to 10,655.30. The S&P 500 .SPX fell 32.19 points, or 2.8 percent, to 1,099.23. The Nasdaq Composite .IXIC lost 79.57 points, or 3.3 percent, to 2,335.83.
Monday, October 3, 2011
Stocks sink, pushing S&P to edge of bear market
S&P sinks to 2011 low, on edge of another bear market; Europe slides as Greece misses targets
, On Monday October 3, 2011, 6:20 pm EDTThe slump came on the first day of trading for the fourth quarter and followed the weakest quarter the market has had since the financial crisis. Stocks opened lower, turned briefly higher in late morning trading, then slid throughout the afternoon. The Dow Jones industrial average lost 258 points.
European markets slumped after Greece said it won't be able to reduce its budget deficits as much as it had agreed to as part of a deal to receive more emergency loans. Markets have responded nervously to headlines out of Europe for weeks, fearful that if Greece defaulted on its debt there might be another lockup in the global financial system, similar to the one triggered by the collapse of Lehman Brothers in September 2008.
"The market is continuing to trade based on what is happening in Europe, and that is going to overshadow everything else," said Quincy Krosby, market strategist at Prudential Financial. "The math (for the Greek bailout) didn't add up a year ago, and the math doesn't add up today," Krosby said. "The market knows that and is waiting for the Europeans to acknowledge it."
The S&P 500 lost 32.19, or 2.9 percent, to 1,099.23. The Dow Jones industrial average fell 258.08 points, or 2.4 percent, to 10,655.30.
Indexes of smaller companies fell even more than the Dow and S&P, which are dominated by large companies. The Nasdaq composite slid 79.57, or 3.3 percent, to 2,335.83. The Russell 2000 index of small companies plunged 5.4 percent to 609.49.
All four indexes hit their lowest level for the year.
Banks, energy, and consumer discretionary stocks fell the most. The yield on the 10-year Treasury note fell to 1.78 percent from 1.91 percent late Friday as investors piled into lower-risk investments. The yield hit a record low of 1.71 percent on Sept. 22.
The S&P index has fallen 19.4 percent since its high for the year on April 29. A 20 percent drop would signify the start of a bear market, ending a bull market that began in March 2009.
The Russell 2000 has been in a bear market since Sept. 20, and is down 30 percent from its April 29 high. The Nasdaq is down 19 percent; the Dow 17 percent.
The renewed concerns about Europe's debt problems pushed the euro down to $1.32 versus the dollar, a 9-month low. The stronger dollar could hurt large U.S. companies that rely on exports by making their products more expensive overseas. Coca-Cola Co. fell 3.2 percent to $65.42. Caterpillar Inc., which sells construction equipment globally, lost 4.5 percent to $70.55. Boeing, another large exporter, dropped 3.7 percent to $58.25.
"Everything that is coming out of Greece suggests that the dollar is only going to strengthen, which doesn't bode well for the international firms," said J.J. Kinahan, chief options strategist at T.D. Ameritrade. "It's tough to be bullish on anything at the moment."
The Dow briefly turned higher after 10 a.m., when the Institute of Supply Management said its gauge of U.S. manufacturing did better in September than Wall Street had predicted. The Dow and S&P turned mixed within 20 minutes, then took a sharp slide shortly after noon.
Concerns that the U.S. economy is headed for another recession helped send the S&P 500 index down 14 percent in the third quarter, which ended Friday. It was the worst quarter for the stock market since the fourth quarter of 2008, at the height of the financial crisis.
In corporate news, AMR Corp., the parent company of American Airlines, plummeted 33 percent to $1.98 as concerns flared up again that the company could be headed for bankruptcy protection. The stock hadn't closed below $2 since 2003. American is considered the U.S. airline most vulnerable to an economic downturn.
Bank of America Corp. plunged 9.6 percent to $5.53, the lowest price for the stock since the financial crisis in 2008. The company has fallen 59 percent since January as investors fret that the nation's largest bank will be hit with more settlements of lawsuits over mortgage securities that lost value after the housing bust.
Yahoo Inc. gained 2.7 percent, to $13.53, after the head of Chinese Internet company Alibaba Group Holdings said he would be interested in buying the company. Yahoo, which recently ousted Carol Bartz as its CEO, has been trying to decide whether to sell parts of the company.
Nine stocks fell for every one that rose on the New York Stock Exchange. Volume was heavy at 5.8 billion shares.
A self-induced recession
YOU know, if it weren't for the politicians, the economy would have a fighting chance.
The probability of recession spiked in early August as financial markets around the world swooned and American economic momentum abruptly drained away. Since then, the economic data have not, for the most part, gone into freefall. This morning we learned the Institute for Supply Management’s manufacturing purchasing managers index rose to 51.6 in September from 50.6, modestly better than expected; current production is growing but new orders are weakening slightly. Construction spending was also quite a bit better than expected in August, with across the board strength in residential, commercial and government. Third quarter growth rates have been revised up. Indeed, as this chart from Macroeconomic Advisers shows, consensus third quarter growth estimates between late August and last Friday generally edged higher. Update: U.S. auto sales in September came in above expectations, according to Autodata: 13.1m annualized units, v 12.1m in August.
But last week the Economic Cycle Research Institute (ECRI), a boutique firm that specialises in business-cycle turning points said America is “tipping into a new recession. And there’s nothing that policy makers can do to head it off.” ECRI is not well known to the general public but at times like this I pay them special attention because their indicators are designed to capture turning points and their track record is pretty good.
Their full report is only available to subscribers so I’m guessing the recessionary behaviour of stock and bond markets is a key contributor to this call. And what bothers me is that financial markets are responding primarily not to economic but to political developments. Europe’s perverse insistence on austerity, stemming from a wholly erroneous diagnosis of the cause of its crisis (as this article from The Economist succinctly notes), coupled with doubts about their banks' ability to withstand sovereign bond losses, is pushing the continent’s economy into a completely unnecessary recession.
In America, the biggest policy-related threat is the fiscal tightening that will happen automatically in the next four months as prior stimulus expires and legislated cuts to discretionary spending bite. Barack Obama has proposed $447 billion in new or renewed stimulus to neutralise that threat, but it requires an ambitious deal in Congress’ super committee, and odds of such a deal by its November 23rd deadline are shrinking. Democrats are reportedly trying to get it to consider tax hikes immediately, and Republicans are apparently saying that puts a big deficit reduction deal out of reach.
A global economy with decent cyclical fuel and no obvious imbalances is being betrayed by politics. Policy has pushed us over the brink in the past when it was for our own good (ie, inflation was threatening). If it happens now, it will be the first recorded instance of it happening by obduracy instead of by choice.
Oct 3rd 2011, 17:05 by G.I. | WASHINGTON
YOU know, if it weren't for the politicians, the economy would have a fighting chance.The probability of recession spiked in early August as financial markets around the world swooned and American economic momentum abruptly drained away. Since then, the economic data have not, for the most part, gone into freefall. This morning we learned the Institute for Supply Management’s manufacturing purchasing managers index rose to 51.6 in September from 50.6, modestly better than expected; current production is growing but new orders are weakening slightly. Construction spending was also quite a bit better than expected in August, with across the board strength in residential, commercial and government. Third quarter growth rates have been revised up. Indeed, as this chart from Macroeconomic Advisers shows, consensus third quarter growth estimates between late August and last Friday generally edged higher. Update: U.S. auto sales in September came in above expectations, according to Autodata: 13.1m annualized units, v 12.1m in August.
But last week the Economic Cycle Research Institute (ECRI), a boutique firm that specialises in business-cycle turning points said America is “tipping into a new recession. And there’s nothing that policy makers can do to head it off.” ECRI is not well known to the general public but at times like this I pay them special attention because their indicators are designed to capture turning points and their track record is pretty good.
Their full report is only available to subscribers so I’m guessing the recessionary behaviour of stock and bond markets is a key contributor to this call. And what bothers me is that financial markets are responding primarily not to economic but to political developments. Europe’s perverse insistence on austerity, stemming from a wholly erroneous diagnosis of the cause of its crisis (as this article from The Economist succinctly notes), coupled with doubts about their banks' ability to withstand sovereign bond losses, is pushing the continent’s economy into a completely unnecessary recession.
In America, the biggest policy-related threat is the fiscal tightening that will happen automatically in the next four months as prior stimulus expires and legislated cuts to discretionary spending bite. Barack Obama has proposed $447 billion in new or renewed stimulus to neutralise that threat, but it requires an ambitious deal in Congress’ super committee, and odds of such a deal by its November 23rd deadline are shrinking. Democrats are reportedly trying to get it to consider tax hikes immediately, and Republicans are apparently saying that puts a big deficit reduction deal out of reach.
A global economy with decent cyclical fuel and no obvious imbalances is being betrayed by politics. Policy has pushed us over the brink in the past when it was for our own good (ie, inflation was threatening). If it happens now, it will be the first recorded instance of it happening by obduracy instead of by choice.
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