Stocks Fall After GDP Revision; IMF Opens New Credit Access

Bikram Pandey
22 Nov, 2011
New York City

Stocks turned lower in light trading in New York after the estimate of economic growth in the third quarter was lowered to 2% from 2.5%. The benchmark indexes in New York trended lower for the fifth day in a row. The IMF relaxed access to capital to member nations struggling in the euro zone.

[R]7:00 PM New York – Stocks turned lower in light trading in New York after the estimate of economic growth in the third quarter was lowered to 2% from 2.5%. The benchmark indexes in New York trended lower for the fifth day in a row. The IMF relaxed access to capital to member nations struggling in the euro zone.[/R]

Stocks continued their struggle today as they have in the last five days and dropped to a new low for the month.

Market focused on the latest downward revision of the U.S. economy and banks in Europe struggled to meet capital requirements and accelerate more asset sale.

The U.S. economic growth in the third quarter was lowered to 2% annual rate from the previous estimate of 2.5% as business reduced their inventories. The economic growth could expand in the current quarter if businesses start rebuilding inventories.

In addition, the Fed minutes of meetings revealed that policy makers discussed various options in how to push more liquidity to the economy and debated merits and pitfalls of each action.

In corporate earnings news, the online video streaming and DVD rental services provider Netflix said it will raise $400 million to ease its cash squeeze and is likely to lose money in 2012. Collective Brands, the operator of shoe retailing chains said it lost money on restructuring charges. Zale’s the jewellery retailer said its fiscal first quarter loss narrowed. Brocade Communications reported better than expected fiscal fourth quarter earnings and revenues.

In Europe, more banks are looking to raise capital either through the sale of stocks or bonds or sell assets or portfolio of sovereign bonds. The sovereign bond market turmoil in the euro zone and decline in stock market valuations have forced most banks to trim bond portfolio or sell international assets.

The stress in the European sovereign bonds markets continued at the elevated levels. The yield on the 10-year Italian bonds traded at 6.74%, Spanish bonds at 6.55% and French bonds at 3.56%.

The International Monetary Fund offered two new lending facilities to troubled nations with fewer conditions attached. The move opened capital access to member nations to the limit of ten times their annual contributions unlike during the Asian crisis in 1998 when the fund imposed onerous conditions on Indonesia and Thailand.

European indexes traded higher after Spain completed its first debt auction at a higher yield and rating agencies left U.S. debt rating unrevised. The Spanish Treasury sold €2.98 billion in debt today at higher yields. The Bundesbank lowered 2012 economic growth outlook for Germany.

German leading index fell in September. The unemployment rate of Sweden and Finland decreased in October and Norway's gross domestic product expanded in the third quarter. Denmark's consumer confidence deteriorated in November.

The UK indexes traded sideways and the public sector net borrowing narrowed in October and the UK government imposed financial restrictions on Iranian banks. Thomas Cook plunged 72% after it sought access to more cash in lean times.

The benchmark index Nikkei in Tokyo declined to the lowest level since March 2009 as the high yen and persistent debt worries in the euro zone and the U.S. dented hopes of higher exports. Osaka Securities agreed to merge with the Tokyo Stock Exchange to form the third largest exchange in the world with $12 trillion market of listed companies.

Australian stocks extended losses for the third day in a row. The benchmark index fell as banks, resource stocks and steelmaker led the decliners.

Commodities, Bonds and Currencies

U.S. bonds yield on 10-year U.S. bond closed down at 1.92% and 30-year bond decreased to 2.88%.

The U.S. dollar fell 0.2% at $1.351 to one euro and closed higher against the Japanese yen to 76.96.

Immediate delivery futures of Texas crude oil increased $1.12 to $98.04 a barrel and futures of natural gas increased 1 cent to $3.42 per mbtu and gasoline prices increased 6.10 cents to 255.00 cents a gallon.

In metals trading, copper increased 1.15 cents to $3.33 per pound, gold rose $21 to $1,700.40 per ounce and silver gained $1.68 to $32.87.