S&P 500 Index Plunges 2.6% on Renewed Euro Zone Volatility

Devan Biswas
01 Nov, 2011
New York City

U.S. indexes declined on the renewed worries about the euro zone and growing scepticism about the recent debt accord. Manufacturing index showed a decline on weaker export orders. MF Global may face regulatory investigation in bankruptcy.

[R]12:10 PM New York – U.S. indexes declined on the renewed worries about the euro zone and growing scepticism about the recent debt accord. Manufacturing index showed a decline on weaker export orders. MF Global may face regulatory investigation in bankruptcy.[/R]

U.S. stocks opened sharply lower and popular indexes dropped more than 2% in the early trading. The declines were rooted in Europe after Greece decided to seek a referendum on the EU bailout deal. Weaker than expected manufacturing growth in China also unnerved the markets.

The decision added to the market uncertainty as investors in New York faced first fallout from the debt gone wrong in the sovereign bonds of Europe.

MF Global filed for bankruptcy protection as one of the ten largest brokerage firms in the U.S. could not cove margin calls on its investments. The markets were also unnerved after media reports suggesting that some of the client’s capital may have been comingled with the company bets however regulators have not completed their investigations so far.

In Europe markets plunged as much as 7% after Greek Prime Minister George Papandreou said that he has decided to put the EU bailout deal to a referendum.

The decision came as a shock to most investors and provoked sharp criticism from French and German leaders.

Papandreou is expected to talk to German Chancellor Angela Merkel later in the day and no date has been set for the vote. Greek Finance Minister Evangelos Venizelos said on Greek TV that the vote most likely set early next year.

Greece is expected to receive €8 billion bailout loan as early as mid-November and is expected to run out of money in early January when the vote may be held to decide the fate of austerity measures and bailout terms.

However, financial markets and the benchmark indexes plunged in active volume in Milan, Frankfurt, Paris and the rest of the European Union.

The attention quickly shifted to bond markets and the yields on 10-year Italian bonds rose to a record high of 6.26%. Spanish bond market yield also added 10 basis points and German bunds yields declined 5 basis points.

In Paris, the CAC-40 Index fell 176.77 or 5.6% to 3,066.07 and in Frankfurt the DAX Index dropped 368.5 or 6% to 5,772.79.

The indexes in Stockholm fell 4.8%, in Madrid dropped 4.9%, in Milan plunged 7% and in Zurich dropped 3.2%. The index in Athens fell 4.5% and in UK dropped 3.5%.

In New York trading, U.S. 10-year bond yields dropped to 2% and oil, copper and gold declined.

U.S., China Manufacturing Slowdown

Manufacturing in the U.S. expanded at a slower pace in October at a slower pace than in September. The index declined to 50.8 in the month from 51.6 in September.

The export orders index declined to 50 in October, from 53.5 in September and the lowest since in June 2009.

China Federation of Logistics and Purchasing said the Purchasing Managers’ Index fell to 504 in October from 51.2 in September.

Stock Movers

Archer Daniels Midland Company ((ADM)) slumped 7.5% or $2.28 to $28.05 after the agriculture products processor reported first quarter net sales rose to $21.9 billion from $16.8 billion in the year ago quarter.

Net earnings in the quarter increased to $460 million or 68 cents per diluted share compared to $345 million or 54 cents per share in the year ago earlier.

Baker Hughes Inc ((BHI)) dropped 12.4% or $7.59 to $53.30 after the oilfield service provider reported third quarter revenue increased 27% to $5.18 billion from $4.08 billion in the year ago quarter.

Net income in the quarter soared to $706 million or $1.61 per diluted share compared to $255 million or $0.59 per share a year ago quarter.

BB&T Corporation ((BBT)) slipped 4.3% or $1.03 to $22.88 after the financial holding company agreed to acquire BankAtlantic, the wholly owned subsidiary of BankAtlantic Bancorp ((BBX)).

Under the terms BB&T will acquire approx $2.1 billion in loan and $3.3 billion in deposits. The transaction has approved by the board of directors of both the companies.

CME Group Inc. ((CME)) slumped 7.2% or $20.38 to $259.62 after the investment service provider reported third quarter total revenues increased 19% to $874.2 million from $733.4 million in the year ago quarter.

Net income in the quarter increased to $316.1 million or $4.74 per diluted share compared to $244.3 million or $3.66 per share a year ago period.