U.S. Indexes Test 2% Decline; Weak Housing Market Outlook

Bikram Pandey
19 Sep, 2011
New York City

U.S. indexes dropped nearly 2% as markets reacted for the first time after European ministers delayed the decision to release the next tranche of Greek bailout. The euro declined and oil fell. In late afternoon rally, stocks recovered most of the losses in New York.

[R]4:10 PM New York – U.S. indexes dropped nearly 2% as markets reacted for the first time after European ministers delayed the decision to release the next tranche of Greek bailout. The euro declined and oil fell. In late afternoon rally, stocks recovered most of the losses in New York.[/R]

U.S. and global indexes slumped after European finance ministers failed to approve the Greek bailout portion. Investors are increasingly factoring a Greek debt default and bond yields of Greece, Italy, Spain and Germany increased.

Market indexes have been vacillating with the news from the euro zone. The indexes have jumped or declined more than 1% in the euro zone in the last fifteen days of the sixty trading days.

The decision to delay the release of Greek bailout portion to October meeting, just ahead of mid-October debt payment raised tensions in the financial markets.

Market indexes in Italy, Spain and Greece declined more than 2% and in Germany dropped near 3% after the result of regional election. The index in France declined 3% on the worries that French banks may suffer more losses linked to the possible Greek debt default.

President Obama’s proposed to cut $3 trillion in spending and letting the tax cuts expire that were scheduled two years ago for the wealthy and eliminate loopholes for corporations. The Obama plan will be submitted to a congressional supercommittee that was created to devise a deficit reduction plan of at least $1.2 trillion over 10 years.

In corporate news, Tyco planned to split itself into three separate public companies that may draw attention of several buyers. United Technologies intended to acquire Goodrich.

In earnings news, Lennar third quarter net income decreased to $20.7 million. Netflix expect to split its DVD-by-mail from online streaming services.

The European indexes fell between 2% and 3% after euro area finance ministers postponed a decision to release next tranche of bailout funds for Greece. German Chancellor Angela Merkel suffered another regional election defeat in Berlin. Euro area construction output rose in July.

Euro area construction output rose, Greek industrial orders and turnover soared, but Spanish industrial orders slumped in July. Finnish producer price inflation eased in August. Spanish government debt rose in the second quarter.

The UK indexes slumped 2% on the ongoing European debt crisis. European finance ministers failed to approve the Greek bailout portion. The UK household finance index eased but home prices climbed in September.

Stocks in Australia turned lower following the declines in the Asian markets. European ministers failed to release the €8 billion to Greece and delayed the decision to till the next meeting in October. Banks closed lower and resource stocks fell.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield decreased to 1.94% and 30-year U.S. bond declined to 3.19%.

The U.S. dollar decreased at $1.3636 to one euro and closed lower against the Japanese yen to 76.49 yen.

Immediate delivery futures of Texas crude oil decreased $2.84 to $85.12 a barrel and futures of natural gas increased 0.003 cents to $3.81 per mbtu and gasoline price fell 7.64 cents to 270.77 cents a gallon.

In metals trading, copper decreased 15.20 cents to $3.77 per pound, gold increased $31.70 to $1,783.20 per ounce and silver fell $1.43 to $39.40.