U.S. Indexes Wipe Out 2011 Gains; Fear Drives Stocks Lower

Bikram Pandey
02 Aug, 2011
New York City

The U.S. indexes declined as economic worries gathered storms in the U.S. and Europe. The Nasdaq dropped 2.8% and the S&P 500 index declined 2.6%, wiping out the gains of the year. Gold soared but crude oil declined. The eight decline wiped out 7%.

[R]4:40 PM New York – The U.S. indexes declined as economic worries gathered storms in the U.S. and Europe. The Nasdaq dropped 2.8% and the S&P 500 index declined 2.6%, wiping out the gains of the year. Gold soared but crude oil declined.[/R]

U.S. stocks turned lower after personal income rose at the slowest pace since November and spending declined in June. The economic worries regained the focus of investors and the yields of sovereign bonds in the peripheral euro-zone rose to the record level. Investors also worried that the latest debt agreement will cloud the economic outlook for the next two years.

President Barack Obama signed the debt agreement and raised the debt ceiling, ending the months-long partisan battle. Earlier the Senate voted 74-26 in favor of the agreement to increase the debt limit until 2013 that will also see expense cuts of $2.4 trillion.

Pfizer fell after it missed earnings views and Hyatt Hotels, Toyota Motor and Tenet Healthcare rose on earnings.

American Tower second quarter net income rose to $115.2 million. Cognizant second quarter net income rose to $208.0 million. Duke Energy second quarter net income swung to $435 million. Pfizer second quarter net income increased 5% to $2.61 billion.

The focus in the European trading shifted to the euro-zone sovereign debt stress as the yields on Italian and Spanish bonds rose to a record high and inched in the danger zone. Belgium completed the sale of Treasury bonds but yields rose. The euro declined and Italy’s finance committee is scheduled to meet to discuss rising yields.

Stocks in Japan closed higher on the hopes that the U.S. lawmakers will approve the debt framework agreed by the leaders of the Senate, the House and the White House. The yen hovered near its record high. Exporters and electronics makers gained.

The Australian benchmark index rebounded from the lows of 11-month after the U.S. lawmakers agreed on a framework to cut spending and lift debt ceiling that may not cut unemployment and hut the economy more in the short term.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield decreased to 2.62% and 30-year U.S. bond closed down at 3.92%.

The U.S. dollar decreased at $1.419 to one euro and fell against the Japanese yen to 77.08 yen.

Immediate delivery futures of Texas crude oil decreased $1.37 to $93.53 a barrel and futures of natural gas increased 0.04 cents to $4.15 per mbtu and gasoline price increased 0.11 cents to 305.90 cents a gallon.

In metals trading, copper decreased 2.50 cents to $4.38 per pound, gold rose $33.40 to $1,655.10 per ounce and silver increased $1.31 to $40.61.