Financials Drag S&P 500 Down 1.3%; Greece in Turmoil

Bikram Pandey
19 Oct, 2011
New York City

Stocks in New York trading turned lower as financials led the decliners. The euro weakened and Greece passed more austerity measures as 70,000 demonstrators gather in Athens. Commodities declined and oil fell 3% and copper dropped 5%.

[R]4:30 PM New York – Stocks in New York trading turned lower as financials led the decliners. The euro weakened and Greece passed more austerity measures as 70,000 demonstrators gather in Athens. Commodities declined and oil fell 3% and copper dropped 5%.[/R]

The U.S. indexes slumped after mortgage activity declined on higher interest rates and housing starts soared 15% and consumer prices rose in September.

In earnings news, Abbott Laboratories plans to separate into two publicly traded companies. Apple Inc’s fourth quarter net income rose to $6.62 billion but disappointed some investors and Intel Corp’s third quarter net income increased 17% to $3.5 billion.

Morgan Stanley third quarter net earnings swung to $2.15 billion on accounting change and investors sold financials in the final hour of trading after a law suit filed against banks and payment processors Visa Inc and MasterCard Inc for price fixing ATM access charges.

Greece faced a near shutdown as workers at ports, banks, industries and government stayed away as unions began a two-day strike. Greece is in recession in the fourth year in a row and unemployment in the nation is hovering near 16%.

Prime Minister George Papandreou won a preliminary vote today that will cut pensions and wages of government employees and fire 30,000 workers. Greece will be able to access the bailout funds after the passage of austerity measure after a final vote tomorrow.

European indexes gained on optimism of a resolution to the sovereign debt crisis. However, markets are increasingly factoring a less than positive outcome at the end of this weekend summit as France and Germany differ in how to fund the rescue fund and who has access to.

In a sign of lack of progress in containing debt contagion, third credit rating agency lowered Spain''s rating and cited a lack of progress in debt resolution. Moody’s Investors Services lowered Spain rating and cited lack of progress in lowering government debt and weakening economic growth prospects in the near term.

In corporate news, Permira offered to acquire Genesys from Alcatel-Lucent for $1.5 billion.

In economic news, Euro area current account gap narrowed but construction output rose in August. The German economic growth was estimated to slow to 3% in the current year by the industry association. Iceland’s jobless rate fell in the third quarter and Polish producer price index and output climbed in September.

The UK indexes advanced on the expectations of a larger European rescue fund. The BoE minutes showed policy makers were unanimous in expanding quantitative easing and holding rate at a record low of 0.5%. BSkyB quarterly profit fell 1.3% as investors resist attempts by Murdochs to control the company.

Stocks in Japan declined and traded volatile with the news flow from the euro zone. Olympus extended losses after chairman acknowledged payment to advisors that were higher than earlier disclosed.

Thai floods devastate oldest industrial estate and nine million people are affected from floods with 27 of 77 provinces underwater.

Australian stocks closed higher on the hopes that the euro zone rescue fund will be increased in size. BHP Billiton said its iron ore shipments increased 11% in the quarter to September and impacts of the floods will linger till the end of the year.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond closed down to 2.16% and 30-year bond decreased to 3.17%.

The U.S. dollar increased to $1.374 to one euro and closed higher against the Japanese yen to 76.80 yen.

Immediate delivery futures of Texas crude oil decreased $2.25 to $86.09 a barrel and futures of natural gas increased 0.03 cents to $3.58 per mbtu and gasoline price decreased 7.4 cents to 267.23 cents a gallon.

In metals trading, copper decreased 14.25 cents to $3.21 per pound, gold decreased $9.20 to $1,643.80 per ounce and silver fell $0.77 to $31.06.