S&P 500 Index Drops 2.9%; Citigroup, Bank of America Fall 10%

Bikram Pandey
03 Oct, 2011
New York City

Greek gloom overshadowed market sentiment in New York trading. The S&P 500 index declined below 1,100 and closed down 2.9%. The euro fell on the growing consensus that Greek default is inevitable. Bank of America, Morgan Stanley and Goldman Sachs declined between 4% and 10%.

[R]7:25 PM New York – Greek gloom overshadowed market sentiment in New York trading. The S&P 500 index declined below 1,100 and closed down 2.9%. The euro fell on the growing consensus that Greek default is inevitable. Bank of America, Morgan Stanley and Goldman Sachs declined between 4% and 10%.[/R]

The U.S. indexes were under pressure in the early afternoon after Greek worries overwhelmed investors’ sentiment. The three widely tracked indexes dropped between 2.4% and 3.3% and banks led the losers for the third trading day in a row.

U.S. indexes gained earlier after manufacturing index showed expansion in September but market shifted its focus in the afternoon on the growing worries in the euro zone.

Banks and financials declined after German Finance Minister Wolfgang Schaeuble resisted moves to increase leverage and the size of the euro rescue fund. Separately, Greece passed measures to cut more expenses and in a draft budget estimated higher than expected deficits and lower than expected revenues. Greece also said it will eliminate or cut salaries of 30,000 staff to meet the demand of international lenders and may need more money in the near future.

European indexes slumped after Greece announced new austerity measures and its inability to meet the deficit reduction targets for the years 2011 and 2012.

Elsewhere in Europe, Denmark’s first woman prime minister agreed to form coalition government. Austria passed bailout fund. Euro-zone factory activity declined in September.

Manufacturing activity in Europe continued to decline in September except for Italy. Hungarian trade surplus was lowered in July. Denmark’s retail sales rose but Swiss retail sales slid in August.

The UK indexes tracked weaker European markets after banks took another hit today. A ratings agency affirmed the UK’s triple-A status with stable outlook. The UK manufacturing activity climbed but home prices fell in September.

Stocks in Japan declined following the weekend news from the euro zone. The latest tankan survey indicated improved sentiment among large manufacturers in September. Nippon Yusen KK reported higher than estimated loss in the fiscal first half.

Australian stocks plunged following losses in Asia. The resurgent worries linked to Greece and the euro zone. Greece revised its deficit target higher for the current year and the next year. Banks declined.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield closed down to 1.78% and 30-year U.S. bond decreased to 2.75%.

The U.S. dollar decreased to $1.359 to one euro and closed lower against the Japanese yen to 76.59 yen.

Immediate delivery futures of Texas crude oil decreased $2.17 to $77.02 a barrel and futures of natural gas decreased 0.04 cents to $3.61 per mbtu and gasoline price decreased 2.8 cents to 250.94 cents a gallon.

In metals trading, copper decreased 5.20 cents to $3.10 per pound, gold added $29.50 or 1.8% to $1,651.80 per ounce and silver increased $0.25 to $30.34.