Five-day Stock Rally Halts in New York; Gold Plunges 3.4%

Bikram Pandey
14 Mar, 2012
New York City

U.S. indexes rested after advancing for five days in a row that sparked a world markets rally. Banks were in focus after Fed released results of the latest stress test. Gold dropped more than 3% but crude oil hovered $100 in New York trading.

[R]4:00 PM New York – U.S. indexes rested after advancing for five days in a row that sparked a world markets rally. Banks were in focus after Fed released results of the latest stress test. Gold dropped more than 3% but crude oil hovered $100 in New York trading.[/R]

U.S. indexes traded sideways after advancing for five days that sparked a world markets rally.

Stocks inched lower after mortgage applications fell for the fifth consecutive week, current account deficit widened in the fourth quarter, and import prices rose in February.

Banks were also in focus after the latest stress test showed 15 of the 19 banks with adequate capital under onerous economic conditions. The stress tests, despised by bankers and now a regular annual review by the Fed, put a spotlight on the capital adequacies and the Fed’s emphasis on systemic risk management, the most overlooked in the 2008 crisis.

However, the stress tests did not go far enough to include more weakness in the housing market, potential runs on the banks and another financial storm that may cut off the access to short term financing. The stress tests focused on higher unemployment rates and sustained drops of 50% in stock markets but failed to include the persistent weakness in the housing market.

European indexes extended gains after euro area countries approved a second bailout package for Greece today. Fitch upgraded Greece''s long-term foreign and local currency debt ratings. Italy sold €6 billion of bonds at lower borrowing costs.

The euro area annual inflation remained flat in February but industrial output rebounded in January. Swedish jobless rate fell in February. Swiss sentiment improved in March.

The UK indexes advanced tracking U.S. and European markets. The number of people claiming jobless allowance in the UK rose more than estimated in February. Tullow fiscal 2011 sales and pre-tax profit surged. Legal & General soared 5.4%.

The benchmark index Nikkei in Tokyo jumped 1.5% and closed above 10,000 for the first time in seven months. Weakening yen and improving U.S. economic outlook lifted the index as fund managers prepare for the end of fiscal year.

Australian stocks traded near a 2-week high following a rally in international markets. New home starts fell sharply in the final quarter and for all of 2011 dropped 12.8%. Fortescue Metals Group plans to raise $1 billion in a bond offering to fund expansion.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield increased to 2.27% and 30-year U.S. bond traded higher to 3.41%.

The U.S. dollar increased to $1.301 to one euro and closed higher against the Japanese yen to 83.74 yen.

Immediate delivery futures of Texas crude oil decreased $1.10 to $105.50 a barrel and Brent crude futures fell $1.15 to $125.07. Futures of natural gas decreased 0.01 cents to $2.28 per mbtu and gasoline price decreased 0.8 cents to 334.02 cents a gallon.

In metals trading, copper declined 7.40 cents to $3.82 per pound, gold decreased $58.10 to $1,636.10 per ounce and silver fell $1.66 to $31.92.