Wall Street Down 1.7%; Investors Recalibrate Euro Zone Optimism

Bikram Pandey
17 Oct, 2011
New York City

U.S. stocks declined after European officials played down market expectations of a quick solution to the euro zone debt crisis. Financials and resources stocks led the decliners in New York and European trading. Latest earnings from Wells Fargo and Citigroup showed weak revenue outlook.

[R]4:00 PM New York – U.S. stocks declined after European officials played down market expectations of a quick solution to the euro zone debt crisis. Financials and resources stocks led the decliners in New York and European trading. Latest earnings from Wells Fargo and Citigroup showed weak revenue outlook.[/R]

Stocks in New York fell quickly at the opening and two popular benchmark indexes declined more than 1.8%.

The euro zone worries resurfaced after German finance minister and spokesman for Chancellor downplayed the plans to be released at the end of the weekend summit. Banks are bracing for more demand for capital from regulators and higher losses linked to Greek bonds.

In corporate earnings, Wells Fargo declined as much as 6% after quarterly revenues declined and operating margins narrowed. Citigroup quarterly revenues were flat. Home improvement retailer Lowe’s plans to cut 1,950 jobs and close 20 stores.

AmeriGas agreed to acquire Energy Transfer Partners for $2.9 billion. Citigroup third quarter net earnings surged 74% to $3.8 billion. Sun Life expects to report third quarter loss of $621 million.

Three deals totalling $28 billion were announced today in the energy complex. Kinder Morgan agreed to acquire El Paso Pipeline Partners, LP for $21 billion.

Norway based Statoil ASA agreed to pay $4.4 billion to purchase Brigham Exploration and AmeriGas Partners, L.P. agreed to acquire the propane operations of Energy Transfer Partners, L.P. for $2.9 billion.

European markets turned volatile after comments from German finance minister and spokesman for German Chancellor played down expectations of comprehensive solution on the weekend summit.

Stocks in Japan closed higher following gains in the international markets and a rise in commodities prices. Thailand floods claimed one more industrial estate and another is in direct path of the flood waters north of Bangkok.

Olympus plunged 24% on the worries that regulatory scrutiny may impose fines on the company for improper transaction payments. The stock lost nearly 50% of its value in the last two days of trading after it fired its chief executive.

Stocks in Sydney trading closed higher after metals prices gained in international markets. Qantas continue to struggle with its flight schedule after engineers strike grounded five planes and forced 16 domestic flights cancellation.

Super Retail Group agreed to acquire sports goods retailer Rebel Group for more than $620 million.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond closed down to 2.16% and 30-year bond decreased to 3.14%.

The U.S. dollar increased to $1.375 to one euro and closed lower against the Japanese yen to 76.81 yen.

Immediate delivery futures of Texas crude oil decreased $0.33 to $86.47 a barrel and futures of natural gas decreased 0.03 cents to $3.66 per mbtu and gasoline price decreased 7.8 cents to 274.60 cents a gallon.

In metals trading, copper decreased 4.65 cents to $3.36 per pound, gold decreased $10.50 to $1,672.50 per ounce and silver decreased $0.50 to $31.66.