U.S. Indexes Drop 1%; Gold Falls $93, Oil Down 5%

Bikram Pandey
14 Dec, 2011
New York City

Market indexes in New York traded lower for the third day in a row as bond market yields rose in Europe and the euro declined. The S&P 500 index dropped nearly 4% in the week as the euro retreated more than 3%. Oil plunged 5%, silver tumbled 8% and gold dropped $93 an ounce.

[R]4:50 PM New York – Market indexes in New York traded lower for the third day in a row as bond market yields rose in Europe and the euro declined. The S&P 500 index dropped nearly 4% in the week as the euro retreated more than 3%. Oil plunged 5%, silver tumbled 8% and gold dropped $93 an ounce.[/R]

The U.S. indexes fell declined for the third day in a row as investors focused on rising sovereign bond yields in Europe.

The stress in the bond market has spilled over to the market of stocks in Europe and then to New York as the euro faced selling pressure for the third day in a row. The euro has declined more than 8% against the dollar in the year and is likely to head to $1.20 in the next thirty days according to several currency strategists.

In New York stocks opened lower and quickly accelerated the fall in the early afternoon trading after the euro dipped below $1.30. The dollar has been on the rise against nine major currencies in the last five months.

In corporate news, Chevron and Transocean Ltd were asked to suspend oil exploration in Brazil and fined 20 billion reais or $10.7 billion after an oil spill last month. First Solar Inc dropped more than 20% after the world’s largest solar panels maker said higher competition from Chinese makers cut its profit outlook. Avon Products Inc rose more than 5% after company’s chief executive resigned following several quarters of weak results.

In Europe, the stress in the bond market lifted the yield on the 5-year Italian bonds auction to the record high in the last fourteen years. The yields on Spanish and Irish bonds were also on the rise and French bonds yields were nearly flat but trended higher.

The Italian Treasury sold €3 billion of five-year bonds and Germany sold €4.2 billion of two-year bonds today.

In the economic news across the Atlantic, the euro area industrial production declined in October and a private survey lowered German growth outlook for this year and 2012. Portuguese inflation eased and Swiss producer and import prices declined in November.

The UK indexes declined after unemployment increased to a 17-year high in the three months to October. Thomas Cook fell 3% after reporting an annual pre-tax loss. Wm Morrison planned to create more than 7,000 new jobs in 2012 and Logica plc plans to restructure and eliminate 1,300 jobs.

Stocks in Japan retreated as markets in Asia declined and commodities eased. Revised financial statements from Olympus showed that the company was solvent in each of the last five year period, avoiding worst fears of investors. Nexon, the online gaming company raised $1.2 billion in a public offering.

Australian benchmark indexes closed nearly flat and the dollar briefly traded below parity. Mining and energy stocks generally closed higher. Rio Tinto said it has no immediate plans to increase its stake in Canada based Ivanhoe Mines. Westpac chief indicated future rate cuts may not be passed on to customers.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond decreased to 1.90% and 30-year bond fell to 2.90%.

The U.S. dollar gained 0.4% at $1.298 to one euro and traded higher against the Japanese yen to 78.03.

Immediate delivery futures of Texas crude oil dropped $5.11 to $95.03 a barrel and futures of natural gas decreased 13 cent to $3.14 per mbtu and gasoline price fell 12.2 cents to 250.28 cents a gallon.

In metals trading, copper decreased 16.6 cents to $3.27 per pound, gold fell $93.20 to $1,569 per ounce and silver fell $2.52 to $28.73.