U.S. Stocks Lose Momentum; Euro Zone Turmoil Grows

Bikram Pandey
20 Sep, 2011
New York City

The U.S. indexes advanced sharply at the opening but lost all the gains by the close as the Fed rate setting committee wraps up the 2-day meeting tomorrow. The IMF cut sharply the economic growth outlook for the U.S. and Europe and estimated sustained growth rates in emerging nations.

[R]4:00 PM New York – The U.S. indexes advanced sharply at the opening but lost all the gains by the close as the Fed rate setting committee wraps up the 2-day meeting tomorrow. The IMF cut sharply the economic growth outlook for the U.S. and Europe and estimated sustained growth rates in emerging nations.[/R]

U.S. indexes surged in the morning on the speculation of Fed action at the end of two-day meeting tomorrow but lost the momentum in the late afternoon and focused on the persistent weakness in the housing market as highlighted by the latest housing starts data in late August.

The International Monetary Fund lowered its economic outlook for the U.S. and Europe. The multilateral institution slashed the outlook for the U.S. economic growth to 1.5% from 2.5% estimate in the June. The sharp cut in the outlook in just three months raised brows but also raised questions about the ability of the organization to size the global situation.

The Fund also lowered economic growth estimate for the European Union of 17 nations to 1.6% from the previous estimate of 2%.

IMF and the World Bank are scheduled to hold their annual meetings later in the week in Washington.

International Airlines industry association raised 2011 outlook but highlighted most airlines will squeak by with the high operating costs. U.S. court overthrew Chevron injunction against Ecuador court verdict that requires the multinational oil company to pay $18 billion for environment damage charges.

In earnings news, AutoZone fourth quarter net increased 12% to $301.5 million. American Water Works increased its earnings estimate. Carnival Corp’s third quarter net rose to $1.34 billion. ConAgra first quarter net income declined 41.7% to $85.3 million.

The European indexes pared losses on optimism that Greece may reach an agreement with lenders on the next bailout tranche. Italy rejected a rating downgrade from S&P. Spain sold €4.46 billion of 12- and 18-month T-bills and Greece issued €1.625 billion of 3-month T-bills at higher yields.

German and Dutch sentiment deteriorated in September and Switzerland lowered growth outlook for 2011 and 2012. Italian industrial orders rose in July. Hungary left the benchmark two-week deposit rate unchanged at 6%.

The UK indexes rose after gross mortgage lending increased to 25-month high but Irish manufacturing output prices decreased in August. Lloyds Banking Group slumped 4%.

Stocks in Japan declined and the benchmark index dropped 1.6%. Shipping companies fell after the freight rate measure declined 3%. Banks were among the leading decliners. Nissan Motor plans to source more parts from China and Korea.

The Australian stocks declined on the persistent worries related to the euro zone and growing pessimism about the prospect of Greek default. Italy rejected a debt downgrade by S&P. Resource stocks and banks declined in Sydney trading. Metcash won an interim court ruling to acquire supermarket chain Franklins.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield closed unchanged at 1.94% and 30-year U.S. bond increased to 3.21%.

The U.S. dollar decreased at $1.3687 to one euro and closed lower against the Japanese yen to 76.38 yen.

Immediate delivery futures of Texas crude oil increased $1.19 to $86.89 a barrel and futures of natural gas decreased 0.032 cents to $3.79 per mbtu and gasoline price rose 0.6 cents to 270.25 cents a gallon.

In metals trading, copper decreased 6.60 cents to $3.71 per pound, gold increased $24.60 to $1,783.20 per ounce and silver rose $0.70 to $39.86.