Wall Street Turns Cautious; Greek Worries Mount

Bikram Pandey
14 Feb, 2012
New York City

U.S. stocks declined after soft retail sales in January and rising import prices. Investors were also concerned as euro zone ministers demand more conditions ahead of Greek bailout. L

[R]5:15 PM New York – U.S. stocks declined after soft retail sales in January and rising import prices. Investors were also concerned as euro zone ministers demand more conditions ahead of Greek bailout. L’Oreal heiress resigned from the company board. Japanese companies estimate higher losses linked to Thai floods.[/R]

U.S. stocks traded lower and declined from the high of seven-month after retail sales were softer than expected and spectre of the need to quarantine Greece was openly discussed by European ministers.

U.S. indexes have rallied more than 25% in the last five months but faced a new hurdle as investors began to factor the possibility of Greece defaulting on its debt as euro zone ministers demand more guarantees.

Finance ministers cancelled a Brussels meeting scheduled tomorrow and demand more conditions from Greek lawmakers in a telephone conference before releasing the next tranche of bailout funds.

While politicians are looking for more assurances of implementing measures that will trim €3 billion of government spending, investors are increasingly concerned that Greece may still end up needing more funds that planned or may have to leave the euro zone.

Greek Cabinet late in the day approved €300 million additional spending by cutting pensions at the government owned companies. These additional measures were demanded the euro zone ministers.

In earnings news, BorgWarner fourth quarter net increased to $122 million. Omnicom quarterly net increased 10% on 7.4% rise in sales. Watson Pharmaceuticals fourth quarter net surged to $94.8 million.

L’Oreal increased 3.6% to €84.59 after the company said operating earnings in 2011 increased 7.7% to €3.29 billion and reiterated outlook for 2012. Emerging markets recorded 10.6% growth in sales and Asia Pacific sales increased 13%.

The company also said that L’Oreal heiress Lilliane Bettencourt, 89, resigned from the company board and replaced by her 25-year old grandson. Bettencourt controls 30% stake in the company valued at €49 billion.

European markets turned higher after successful bond auctions from Greece, Spain, Italy and Belgium and German bund futures reversed earlier losses to turn positive. German economic sentiment improved in February but Greek economy shrank at annual rate of 7% in the final quarter of 2011.

Stocks in Tokyo trading staged a reversal after the Bank of Japan expanded its asset purchase and lending program by $130 billion to $835 billion. Sumitomo Rubber gained on higher than expected income. MS&AD declined on sharply higher loss linked to Thai floods.

Stocks in Sydney trading closed lower on a weakness in resource sector and banking stocks. Tabcorp Holdings plans to raise $200 million in a debt offering. News Corp faces more inquiries after unearthing of evidence that linked James Murdoch to the wider hacking practice.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond decreased to 1.93% and 30-year bond inched lower to 3.07%.

The U.S. dollar traded up 0.6% to $1.311 to one euro and edged up against the Japanese yen at 78.47.

Immediate delivery futures of Texas crude oil rose 3 cents to $100.88 a barrel and futures of natural gas added 0.11 cents to $2.54 per mbtu and gasoline price decreased 2.5 cents to 298.75 cents a gallon.

In metals trading, copper decreased 3.75 cents to $3.80 per pound, gold decreased $7.50 to $1,717.40 per ounce and silver fell 32 cents to $33.40.