'Fat finger' trade forces US stocks dive
May 7, 2010 - 6:30AM
The biggest intraday point drop ever for the Dow Jones Industrial Average may have been caused by an erroneous trade entered by a person at a big Wall Street bank that in turn triggered widespread panic-selling.
At one stage, the Dow was down a whopping 998 points - or 9 per cent - before rebounding but it was still sharply lower for the session as continuing worries about Greece and the so-called sovereign debt contagion ate into investor confidence.
The so-called "fat finger" trade apparently involved an exchange-traded fund that holds shares of some of the biggest and most widely traded stocks, sources said. The trade apparently was put in on the Nasdaq Stock Market, sources said.
But US stocks still ended sharply lower, as continuing worries about the debt crisis in Greece ate into market confidence, prompting a wide-spread sell-off.
US stocks posted their largest percentage drop since April 2009, with all three major indexes ending down more than 3 per cent.
Indexes earlier in the afternoon had plunged even more steeply, before paring losses.
Observers questioned why Procter & Gamble’s stock tumbled precipitously - and some say that could have been behind the massive plunge.
Both Fox News and CNBC reported that a trading error involving P&G stock could have been responsible for part of a dip that dragged the Dow Jones Industrial Average within a hair’s breadth of a 1000-point drop.
The sudden sell-off saw investors desert stocks wholesale.
But P&G’s stock, which had been trading at $US62, suddenly began to crash, falling around 20 per cent at one point for no apparent reason.
The Dow Jones industrial average ended down 347.80 points, or 3.2 per cent, at 10,520.32. The Standard & Poor's 500 Index was off 37.75 points, or 3.24 per cent, at 1128.15. The Nasdaq Composite Index was down 82.65 points, or 3.44 per cent, at 2319.64.
Several sources said the speculation is that the trade was entered by someone at Citigroup. A Citigroup spokesman said it was investigating the rumour but that the bank currently had no evidence that an erroneous trade had been made.
http://www.smh.com.au/business/markets/fat-finger-trade-forces-us-stocks-dive-20100507-uh91.html
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Showing posts with label Djia. Show all posts
Showing posts with label Djia. Show all posts
Friday 7 May 2010
Wednesday 5 May 2010
US stocks dive as Greek crisis takes toll
US stocks dive as Greek crisis takes toll
May 5, 2010 - 6:35AM
Overseas markets in crash mode
The DJIA was down by 2.0 per cent, and the S&P500 down by 2.4 per cent after heavy selling on
Investors dumped US stocks in Wall Street's worst session in three months on the fear that even with a bailout for Greece, Europe's debt crisis could spread to other weak euro zone countries.
The sell-off echoed a wave of fear that gripped financial markets as investors fretted the crisis in Europe could derail the global economic recovery. A gauge of investor fear jumped more than 18 per cent.
What you need to know
The SPI was off 104 points at 4630
The Australian dollar was buying 90.89 US cents
The Reuters Jefferies CRB index fell 2.34%
Big exporters to Europe including technology and industrial companies tumbled, with Hewlett-Packard off 3.9 per cent to $US50.64 and Caterpillar down 4.6 per cent to $US66.70.
"It looks like we've got some profit-taking on early-cycle exporters, companies with a big global presence over in Europe," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.
Basic materials shares tumbled as the euro hit a one-year low against the US dollar. The Reuters-Jefferies commodity index and the S&P materials index both posted their worst day since early February, sliding 2.3 per cent and 3.5 per cent, respectively.
The Dow Jones industrial average lost 225.06 points, or 2.02 per cent, to 10,926.77. The Standard & Poor's 500 Index fell 28.66 points, or 2.38 per cent, to 1173.60. The Nasdaq Composite Index dropped 74.49 points, or 2.98 per cent, to 2424.25.
The CBOE Volatility Index, Wall Street's so-called fear gauge, finished up 18.1 per cent at 23.84 points, its highest closing level in three months.
Airline shares were hard hit, with the Arca Airline Index shedding 5.39 per cent after a recent run-up.
Despite the S&P 500's steep fall, the benchmark did not break major technical support except for a short-term bottom at 1181 on the S&P 500, the intraday low hit last week.
"For initial support most people are watching the 50-day moving average, which is at 1168," said John Schlitz, chief US market technician at Instinet in New York.
Encouraging US economic data on manufacturing and housing failed to provide a floor to the market. Reports showed new orders received by US factories in March unexpectedly increased and pending home sales rose to a five-month high.
On the upside, better-than expected earnings from drug makers Merck & Co Inc and Pfizer Inc boosted those shares by about 2 per cent each.
About 12 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, more than last year's estimated daily average of 9.65 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 6 to 1, while on the Nasdaq, about 29 stocks fell for every five that rose.
Reuters
http://www.smh.com.au/business/markets/us-stocks-dive-as-greek-crisis-takes-toll-20100505-u7o3.html
May 5, 2010 - 6:35AM
Overseas markets in crash mode
The DJIA was down by 2.0 per cent, and the S&P500 down by 2.4 per cent after heavy selling on
Investors dumped US stocks in Wall Street's worst session in three months on the fear that even with a bailout for Greece, Europe's debt crisis could spread to other weak euro zone countries.
The sell-off echoed a wave of fear that gripped financial markets as investors fretted the crisis in Europe could derail the global economic recovery. A gauge of investor fear jumped more than 18 per cent.
What you need to know
The SPI was off 104 points at 4630
The Australian dollar was buying 90.89 US cents
The Reuters Jefferies CRB index fell 2.34%
Big exporters to Europe including technology and industrial companies tumbled, with Hewlett-Packard off 3.9 per cent to $US50.64 and Caterpillar down 4.6 per cent to $US66.70.
"It looks like we've got some profit-taking on early-cycle exporters, companies with a big global presence over in Europe," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.
Basic materials shares tumbled as the euro hit a one-year low against the US dollar. The Reuters-Jefferies commodity index and the S&P materials index both posted their worst day since early February, sliding 2.3 per cent and 3.5 per cent, respectively.
The Dow Jones industrial average lost 225.06 points, or 2.02 per cent, to 10,926.77. The Standard & Poor's 500 Index fell 28.66 points, or 2.38 per cent, to 1173.60. The Nasdaq Composite Index dropped 74.49 points, or 2.98 per cent, to 2424.25.
The CBOE Volatility Index, Wall Street's so-called fear gauge, finished up 18.1 per cent at 23.84 points, its highest closing level in three months.
Airline shares were hard hit, with the Arca Airline Index shedding 5.39 per cent after a recent run-up.
Despite the S&P 500's steep fall, the benchmark did not break major technical support except for a short-term bottom at 1181 on the S&P 500, the intraday low hit last week.
"For initial support most people are watching the 50-day moving average, which is at 1168," said John Schlitz, chief US market technician at Instinet in New York.
Encouraging US economic data on manufacturing and housing failed to provide a floor to the market. Reports showed new orders received by US factories in March unexpectedly increased and pending home sales rose to a five-month high.
On the upside, better-than expected earnings from drug makers Merck & Co Inc and Pfizer Inc boosted those shares by about 2 per cent each.
About 12 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, more than last year's estimated daily average of 9.65 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 6 to 1, while on the Nasdaq, about 29 stocks fell for every five that rose.
Reuters
http://www.smh.com.au/business/markets/us-stocks-dive-as-greek-crisis-takes-toll-20100505-u7o3.html
Saturday 20 March 2010
The many flaws of Wall Street's latest rally
March 19, 2010
With US stocks pressing up against 17-month highs, the inevitable question arises: "Does this rally have legs?"
From one perspective, things couldn't look rosier for the bulls. The S&P 500 touched another 17-month high on Wednesday, breaking through levels analysts identified as significant resistance. More stocks in the S&P are hitting fresh 52-week highs than at any time during the course of the rally.
But the steady rise in the last six weeks has been accompanied by middling volume and underperformance in key areas, such as semiconductor companies. Market technicians and strategists believe the current run is overbought, suggesting at least a near-term pullback.
"What we are seeing represents a very defensive stance among investors," said Mike O'Rourke, chief market strategist at BTIG, an institutional brokerage firm in New York. "You are seeing investor disinterest in equities and that's why volume is languishing here."
This week's consolidated volume has been telling. With major averages hitting recovery highs, Monday marked the third slowest volume day of 2010 when about 7.24 billion shares traded on the combined New York, American and Nasdaq stock markets, below last year's estimated daily average of 9.65 billion.
The tepid volume suggests a lack of broader conviction, and is a sign momentum is mostly behind the latest run-up rather than any broad-based accumulation of stocks.(comment: an interesting point)
Momentum investing relies on chasing short-term price action on hard-charging stocks and shunning those that appear to be out of favor.
John Kosar, market technician and president of Asbury Research in Chicago, said there was a growing risk the run-up that resumed in February was a "countertrend" rally within a larger decline that began in January.
"Volume measures investor urgency and this recent lack of urgency to buy is characteristic of either peaking markets or countertrend rallies," he said.
Overbought
Investors were abuzz this week as the benchmark S&P 500 took out resistance at the 1150 level. Investors see that as clearing a path to a run to 1200. But other important technical metrics are not garnering the attention of the overall average.
Investors were abuzz this week as the benchmark S&P 500 took out resistance at the 1150 level. Investors see that as clearing a path to a run to 1200. But other important technical metrics are not garnering the attention of the overall average.
According to Reuters chart data, the S&P 500's 14-day relative strength index (RSI), which measures the magnitude of the gains to determine overbought or oversold conditions, is hitting levels not seen since September 1995 - approaching 91, a threshold that technically signifies an overbought market.
An RSI ranges from zero to 100. When it approaches 70 that traditionally signals an overbought condition in an asset or an index, and the risk of a pullback increases.
Additionally, research firm Bespoke Investment Group pointed out that 89 per cent of S&P 500 stocks are trading above their 50-day moving averages, a level that usually augers for a pullback in the short-term.
Semi-tough
The semiconductor index has failed to confirm coincident 19-month closing highs in the Nasdaq Composite index, a bearish development considering technology's tendency to lead the market's advances and declines.
The semiconductor index has failed to confirm coincident 19-month closing highs in the Nasdaq Composite index, a bearish development considering technology's tendency to lead the market's advances and declines.
The S&P 500 is up 10.3 per cent since its recent closing low of February 8, while the small-cap benchmark Russell 2000 has rallied more than 16 per cent over the same period. Year-to-date the S&P 500 is up about 5 per cent, whereas the Russell 2000 is up 9 per cent.
To be sure, the run-up in small-cap stocks shows how risk appetite has risen due to optimism about the US recovery. Small-cap companies are viewed as more nimble and among the first to benefit from an apparent recovery.
But the divergence between strength in the Russell 2000 and the semiconductor index should be taken as a cautionary tale. Divergences occur when key indexes move in the opposite direction of the market's primary trend and tend to catch investors off guard.
Analysts say another ominous development is the sharp decline in overall volatility, suggesting complacency is setting in. The CBOE Volatility index, Wall Street's favorite gauge of investor sentiment, is trading at 22-month lows below the 17 level.
According to Kosar, declines to 18 or lower in the VIX have either coincided with or led every important near-term peak in the S&P 500 since October 2007. He said the market's gains may be limited without a near-term decline to work off extremes in investor complacency. VIX futures suggest a rise in volatility later this year.
"Although the February rally in US equity prices may continue from here on a week-to-week basis, a sustainable advance is unlikely from here without at least one to several months of a corrective decline first," said Kosar.
Thursday 15 October 2009
Dow breaks through the 10,000 barrier
The Dow Jones broke through the critical 10,000 mark for the first time in a year last night – raising hopes that a fully-fledged bull market is now in train
By Edmund Conway, Economics Editor
Published: 8:03PM BST 14 Oct 2009
Things are looking up on Wall Street. Shrugging off warnings from economists that Britain and the US could fall victim to a W-shaped recession, markets hit their highest levels since the height of the crisis just over a year ago. London's benchmark FTSE 100 index rose by almost 2pc, while in Wall Street the Dow Jones Industrial Average pushed briefly above the psychologically important 10,000-point barrier.
The FTSE was 101.95 points higher at 5,256.10, more than reversing Tuesday's 1.1pc slide. The index has now rallied by 52pc since hitting a low in March, and is almost a fifth higher than at the start of the year. The Dow Jones was up by 1.1pc in late trading at 9979.74 points.
It came after the Office for National Statistics reported that although UK unemployment is still on the rise, recent months have seen the smallest increases for a year. It said the jobless total in the three months to August rose by 88,000 – smaller than any quarter since last summer, before the Lehman Brothers' collapse. The news helped the pound to a rare increase against other leading currencies, rising more than a cent against the dollar to $1.5953. However, the market's strength owed less to domestic news than an overarching sense that the global economy, having emerged from recession in the summer, is now powering ahead to a full-blooded recovery.
One theory, that growth will be delivered by emerging market powerhouses such as India and China, was underlined by new official data on Chinese exports. It showed that with Chinese investment continuing to increase, its appetite for commodities soared in recent months, while data on exports to neigh-bouring countries suggested that the broader Asian economy is gaining traction.
The news pushed shares in commodity producers sharply higher, among them Rio Tinto, Vedanta, BHP Billiton and oil groups BP and Shell.
International corporate news generated a further boost. JP Morgan's announcement that its profits rose by a phenomenal 581pc in the third quarter to $3.6bn (£2.3bn) lifted financial shares both in the US and the UK. Barclays, Royal Bank of Scotland and Lloyds Banking Group rose amid hopes that they too will report improved activity in recent months, when they update investors.
Analysts said that although the economic forecasts for the coming years, including those issued by the International Monetary Fund earlier this month, remain downbeat, earnings figures from leading companies tell a different story. Philip Gillett, trader at IG Index, said investors had been better-than-predicted third-quarter earnings news.
http://www.telegraph.co.uk/finance/markets/6329242/Dow-breaks-through-the-10000-barrier.html
Comment: Beware the bull market. Embrace the bear.
By Edmund Conway, Economics Editor
Published: 8:03PM BST 14 Oct 2009
Things are looking up on Wall Street. Shrugging off warnings from economists that Britain and the US could fall victim to a W-shaped recession, markets hit their highest levels since the height of the crisis just over a year ago. London's benchmark FTSE 100 index rose by almost 2pc, while in Wall Street the Dow Jones Industrial Average pushed briefly above the psychologically important 10,000-point barrier.
The FTSE was 101.95 points higher at 5,256.10, more than reversing Tuesday's 1.1pc slide. The index has now rallied by 52pc since hitting a low in March, and is almost a fifth higher than at the start of the year. The Dow Jones was up by 1.1pc in late trading at 9979.74 points.
It came after the Office for National Statistics reported that although UK unemployment is still on the rise, recent months have seen the smallest increases for a year. It said the jobless total in the three months to August rose by 88,000 – smaller than any quarter since last summer, before the Lehman Brothers' collapse. The news helped the pound to a rare increase against other leading currencies, rising more than a cent against the dollar to $1.5953. However, the market's strength owed less to domestic news than an overarching sense that the global economy, having emerged from recession in the summer, is now powering ahead to a full-blooded recovery.
One theory, that growth will be delivered by emerging market powerhouses such as India and China, was underlined by new official data on Chinese exports. It showed that with Chinese investment continuing to increase, its appetite for commodities soared in recent months, while data on exports to neigh-bouring countries suggested that the broader Asian economy is gaining traction.
The news pushed shares in commodity producers sharply higher, among them Rio Tinto, Vedanta, BHP Billiton and oil groups BP and Shell.
International corporate news generated a further boost. JP Morgan's announcement that its profits rose by a phenomenal 581pc in the third quarter to $3.6bn (£2.3bn) lifted financial shares both in the US and the UK. Barclays, Royal Bank of Scotland and Lloyds Banking Group rose amid hopes that they too will report improved activity in recent months, when they update investors.
Analysts said that although the economic forecasts for the coming years, including those issued by the International Monetary Fund earlier this month, remain downbeat, earnings figures from leading companies tell a different story. Philip Gillett, trader at IG Index, said investors had been better-than-predicted third-quarter earnings news.
http://www.telegraph.co.uk/finance/markets/6329242/Dow-breaks-through-the-10000-barrier.html
Comment: Beware the bull market. Embrace the bear.
Wednesday 14 October 2009
Strong Earnings Push Wall Street Higher
Strong Earnings Push Wall Street Higher
By JACK HEALY
Published: October 14, 2009
For Wall Street, the news was sweet: a major bank turned a $3.6 billion profit, earnings were up at a major computer-chip maker, and retail sales held up better than expected.
And so investors around the world went shopping, lifting stock markets from London to New York to Mexico City. On Wall Street, shares touched their highest levels of the year, and the Dow flirted again with retaking 10,000.
Many investment experts dismiss the significance of such big, round benchmark numbers, and say that no sophisticated investors or hedge funds make investment decisions based on whether a stock index’s total value can be measured in four or five digits.
The Dow Jones industrial average, one of the most-watched measures of the financial markets, surged at the opening and was up 73 points, or 0.7 percent, at about 10:30 a.m. The broader Standard & Poor’s 500-stock index and the Nasdaq were about 0.9 percent higher.
The major stock indexes have rebounded by 50 percent or more in a scorching rally that began in early March and galloped higher through the summer and early autumn, as the economy stabilized and once-bleeding companies began to report better profits and rising revenue.
That optimism got louder on Wednesday.
Investors rushed to take positions on companies and commodities that could benefit from a broad upturn in corporate profits and the global economy. Crude oil prices hit their highest levels since last October, topping $75 a barrel. Safety bets like the dollar and government bonds got creamed.
Financial stocks surged after JPMorgan Chase announced a third-quarter profit that trounced expectations. JPMorgan was the first major financial company to announce earnings, and the sight of rising revenues and stabilizing losses at one of Wall Street’s most powerful banks lifted expectations that the financial sector was back on its feet, a year after its near-implosion.
Shares of JPMorgan climbed 3 percent in early trading, and its rising tide lifted shares of other banks like Goldman Sachs, Wells Fargo, Bank of America and Citigroup, which are all scheduled to report their own quarterly results in the days ahead.
Even regional banks shared in the hoopla, despite lingering problems with their mortgage portfolios and worries that the smaller banks are more exposed to losses in the commercial real estate market.
Investors swept up shares of computer companies, search engines and software makers after Intel reported profits that surpassed Wall Street’s expectations and foreshadowed a return to global growth. Shares of Intel, which reported a profit after markets closed on Tuesday, were up 3 percent.
Shares were also higher in Asia and Europe. The FTSE 100 in London rose 1.7 percent while the DAX in Frankfurt was 2 percent higher. The CAC-40 in Paris rose 1.7 percent.
In Asia, the Shanghai index rose 1.2 percent, while Hong Kong’s Hang Seng index increased 2 percent. Japan’s Nikkei index slipped 0.2 percent.
http://www.nytimes.com/2009/10/15/business/15markets.html?hpw
By JACK HEALY
Published: October 14, 2009
For Wall Street, the news was sweet: a major bank turned a $3.6 billion profit, earnings were up at a major computer-chip maker, and retail sales held up better than expected.
And so investors around the world went shopping, lifting stock markets from London to New York to Mexico City. On Wall Street, shares touched their highest levels of the year, and the Dow flirted again with retaking 10,000.
Many investment experts dismiss the significance of such big, round benchmark numbers, and say that no sophisticated investors or hedge funds make investment decisions based on whether a stock index’s total value can be measured in four or five digits.
The Dow Jones industrial average, one of the most-watched measures of the financial markets, surged at the opening and was up 73 points, or 0.7 percent, at about 10:30 a.m. The broader Standard & Poor’s 500-stock index and the Nasdaq were about 0.9 percent higher.
The major stock indexes have rebounded by 50 percent or more in a scorching rally that began in early March and galloped higher through the summer and early autumn, as the economy stabilized and once-bleeding companies began to report better profits and rising revenue.
That optimism got louder on Wednesday.
Investors rushed to take positions on companies and commodities that could benefit from a broad upturn in corporate profits and the global economy. Crude oil prices hit their highest levels since last October, topping $75 a barrel. Safety bets like the dollar and government bonds got creamed.
Financial stocks surged after JPMorgan Chase announced a third-quarter profit that trounced expectations. JPMorgan was the first major financial company to announce earnings, and the sight of rising revenues and stabilizing losses at one of Wall Street’s most powerful banks lifted expectations that the financial sector was back on its feet, a year after its near-implosion.
Shares of JPMorgan climbed 3 percent in early trading, and its rising tide lifted shares of other banks like Goldman Sachs, Wells Fargo, Bank of America and Citigroup, which are all scheduled to report their own quarterly results in the days ahead.
Even regional banks shared in the hoopla, despite lingering problems with their mortgage portfolios and worries that the smaller banks are more exposed to losses in the commercial real estate market.
Investors swept up shares of computer companies, search engines and software makers after Intel reported profits that surpassed Wall Street’s expectations and foreshadowed a return to global growth. Shares of Intel, which reported a profit after markets closed on Tuesday, were up 3 percent.
Shares were also higher in Asia and Europe. The FTSE 100 in London rose 1.7 percent while the DAX in Frankfurt was 2 percent higher. The CAC-40 in Paris rose 1.7 percent.
In Asia, the Shanghai index rose 1.2 percent, while Hong Kong’s Hang Seng index increased 2 percent. Japan’s Nikkei index slipped 0.2 percent.
http://www.nytimes.com/2009/10/15/business/15markets.html?hpw
Tuesday 3 March 2009
Dow slides below 7,000 for first time in twelve years
Dow slides below 7,000 for first time in twelve years
The Dow Jones below 7,000 for the first time in twelve years on Monday after American International Group posted the largest quarterly loss in US corporate history.
By Telegraph Staff
Last Updated: 3:59PM GMT 02 Mar 2009
Dow Jones Industrial Average slides below 7,000 for first time in twelve years.
The blue chip index fell 144.8 - or 2pc - to 6918 points within minutes of opening after AIG reported a $61.7bn (£44bn) fourth-quarter loss and the US government said it would give the insurer another $30bn in loans. This is in addition to the $150bn it has already given the ailing insurer.
Wall Street's concerns about how governments around the world will fix the financial system and global economy have sent stocks to their lowest levels in 12 years.
The Dow Jones industrial average has dropped for six consecutive months, and is worth less than half of its October 2007 record high of 14,164.53.
Investors were also worried about European financial companies. HSBC, Europe's largest bank by market value, on Monday reported a 70pc drop in 2008 net profit and said it needs to raise £12.5bn and cut 6,100 jobs in the US.
HSBC and general gloom about banks and the global economy dragged down European stocks. Markets in London, Frankfurt and Paris was down between 2pc and 3.5pc just after trading started in New York.
Billionaire Warren Buffett wrote in his annual letter to investors on Saturday that he is sure "the economy will be in shambles throughout 2009 — and, for that matter, probably well beyond — but that conclusion does not tell us whether the stock market will rise or fall".
"As bad as things are, they can still get worse, and get a lot worse," Bill Strazzullo, chief market strategist for Bell Curve Trading, told AP.
Mr Strazzullo said he believes there's a significant chance the S&P 500 and the Dow will fall back to their 1995 levels of 500 and 5,000, respectively.
http://www.telegraph.co.uk/finance/markets/4927959/Dow-slides-below-7000-for-first-time-in-twelve-years.html
The Dow Jones below 7,000 for the first time in twelve years on Monday after American International Group posted the largest quarterly loss in US corporate history.
By Telegraph Staff
Last Updated: 3:59PM GMT 02 Mar 2009
Dow Jones Industrial Average slides below 7,000 for first time in twelve years.
The blue chip index fell 144.8 - or 2pc - to 6918 points within minutes of opening after AIG reported a $61.7bn (£44bn) fourth-quarter loss and the US government said it would give the insurer another $30bn in loans. This is in addition to the $150bn it has already given the ailing insurer.
Wall Street's concerns about how governments around the world will fix the financial system and global economy have sent stocks to their lowest levels in 12 years.
The Dow Jones industrial average has dropped for six consecutive months, and is worth less than half of its October 2007 record high of 14,164.53.
Investors were also worried about European financial companies. HSBC, Europe's largest bank by market value, on Monday reported a 70pc drop in 2008 net profit and said it needs to raise £12.5bn and cut 6,100 jobs in the US.
HSBC and general gloom about banks and the global economy dragged down European stocks. Markets in London, Frankfurt and Paris was down between 2pc and 3.5pc just after trading started in New York.
Billionaire Warren Buffett wrote in his annual letter to investors on Saturday that he is sure "the economy will be in shambles throughout 2009 — and, for that matter, probably well beyond — but that conclusion does not tell us whether the stock market will rise or fall".
"As bad as things are, they can still get worse, and get a lot worse," Bill Strazzullo, chief market strategist for Bell Curve Trading, told AP.
Mr Strazzullo said he believes there's a significant chance the S&P 500 and the Dow will fall back to their 1995 levels of 500 and 5,000, respectively.
http://www.telegraph.co.uk/finance/markets/4927959/Dow-slides-below-7000-for-first-time-in-twelve-years.html
Tuesday 24 February 2009
Stocks Slump on Corporate Woes; Indexes Fall by 3.4%
Stocks Slump on Corporate Woes; Indexes Fall by 3.4%
By JACK HEALY 5:17 PM ET
Investors pushed the Dow and S.&P. 500 down to 1997 levels as losses piled up in technology and major industrial companies.
By JACK HEALY 5:17 PM ET
Investors pushed the Dow and S.&P. 500 down to 1997 levels as losses piled up in technology and major industrial companies.
Investors called it another day of water-torture declines on Wall Street: drop, drop, drop.
A broad sell-off sent Wall Street staggering lower in the last hour of trading on Monday as the banking system continued to worry investors. The Dow Jones industrial average was down 250.89 points at the close while the Standard & Poor’s 500-stock index, a broader gauge of the market closed at its lowest level since April 1997.
Losses piled up in technology companies like Apple, Google and I.B.M. and industrial companies like DuPont, Caterpillar and the aluminum maker, Alcoa. But in a reversal, battered shares of Citigroup and Bank of America closed higher, and the financial sector fared better than the broader market.
With worries growing about the stability and solvency of the country’s big banks, the Treasury Department tried to reassure jittery investors with a message supporting the financial system and laying out details of the coming “stress tests” of major banks. The message did not calm anyone.
After a brief rise in early trading, stock markets fell into the red and sank lower throughout the afternoon. The Dow Jones industrial average closed down 3.4 percent to 7.114.78 while the broader S. & P. 500 fell 3.47 percent, or 26.72 points, to 743.33. The technology heavy Nasdaq was down 3.7 percent, or 53.51 points, to 1,387.72 as shares of technology companies turned lower.
Shares of Microsoft, Hewlett-Packard and other technology companies fell amid concerns about how the sector would hold up as the economy spins lower. Companies that make basic materials like steel, chemicals and plastic also sank. Crude oil fell $1.59, to $38.44 a barrel, scaling back some recent gains, and gold prices also fell back slightly to $995 an ounce.
The day’s declines continued the downward momentum of a brutal week that sent the major indexes down more than 6 percent. “In lieu of anything the market sees as positive, it’s going to continue its easiest path, and the path it sees is down,” said Joseph Saluzzi, co-head of equity trading at Themis Trading. “That’s where we’re stuck right now, and who’s going to get out in front of it?”
With America’s banking system facing a round of “stress tests,” the prospect of greater governmental control and an uncertain future, the government tried to assure investors early Monday that it would stand behind the banking system, and that it would provide additional temporary aid to banks.
“The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth,” the Treasury Department, the Federal Deposit Insurance Corporation and other agencies said in an unusual joint statement. “Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments.”
The Treasury statement added that major banking institutions were “well capitalized.”
But analysts said investors remained worried about how America’s biggest banks would deal with the troubled assets on their balance sheets, and their prospects for weathering a prolonged economic contraction. Shares of Wells Fargo, Citigroup and Bank of America stayed positive, but other financial companies like Morgan Stanley and Goldman Sachs turned negative.
Analysts said that after fevered speculation last week about bank nationalization, many investors now expect the government to move in that direction, despite statements from the White House supporting a privately held banking system. Stock markets dropped on Friday amid concerns that a broad government takeover could wipe out financial shareholders.
Now, with the government set to begin the “stress tests” on Wednesday, investors want to know which banks will be deemed healthy and which will not, analysts said. Of most pressing concern are big banks including Citigroup, Bank of America, Wells Fargo and JPMorgan Chase, followed by regional chains.
“We need to know how they stand right now,” said Dave Rovelli, managing director of trading at Canaccord Adams. “The uncertainty of waiting for the results of these stress test is just killing the markets.”
Three weeks ago, stock markets tumbled after the Treasury Department announced plans to form a public-private partnership to take troubled mortgage-related assets off the balance sheets of banks. Investors said the government’s plans were short on details and left too much uncertainty about how those assets would be valued, or how private investors would be enticed to bid on them.
The losses on Wall Street came one week after the Dow sank to its lowest levels in six years on growing fears about banks across Europe and the United States.
By the end of trading on Friday, the Dow had tumbled 6.2 percent for the week, its worst since October, and had sunk to its lowest levels in six years. The S. & P. 500 fell 6.5 percent, dropping below 800, but was still slightly above its bear-market lows of Nov. 20.
“The technicians now have control of this market,” said Sam Stovall, chief investment strategist at Standard & Poor’s Equity Research. “People are saying, ‘Where do we go now? We don’t know what’s next.’ ”
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