Third Daily Decline in S&P 500 Index, European Markets Soar

Nichole Harper
15 Jan, 2015
New York City

Stocks on Wall Street weakened for the second day in a row and crude oil price fell another 1.1% but gold surged 2.7%. Switzerland abandoned its peg to euro after vociferously defending the arrangement one month ago. India lowered its reference rate.

[R]12:40 PM New York – Stocks on Wall Street weakened for the second day in a row and crude oil price fell another 1.1% but gold surged 2.7%. Switzerland abandoned its peg to euro after defending the arrangement one month ago and ambushed currency traders. India lowered its reference rate.[/R]

Stocks on Wall Street struggled and investors kept watch on the dramatic moves in Swiss franc after a surprise move by the central bank to abandon the peg to the euro.

In addition, Reserve Bank of India also lowered its reference rate for the first time since last April.

On Wall Street trading, Tollbooth Strategy Index fell 0.6% or 59.03 to 9,757.20.

S&P 500 index slid 6.37 or 0.3% to 2,004.65 and the Nasdaq Composite Index fell 35.03 or 0.8% to 4,604.29.

Crude oil continued its descent and futures price of West Texas crude decreased 57 cents to $47.91 and gold rose $27.90 to $1,262.70 an ounce.

Swiss Franc Surges Stunning 41%

Swiss National Bank abandoned franc peg to euro that only a month ago had vociferously it has “unlimited” funds to support.

In a sharp reversal to of policy, the central bank said it will no longer defend the minimum peg of 1.20 franc to a euro ahead of key meeting of the policymakers at European Central Bank.

The central bank also lowered its interest rate by 50 basis points to -0.75% meaning investors will have to pay now to hold deposits in Swiss franc. The move is likely to dissuade foreign investors from the popular currency.

The bank also said it will move interest rate target for three-month London interbank offered rate for francs deeper into negative territory.

The rate range is now revised to between minus 1.25% and minus 0.25% from the current target range between minus 0.75% and 0.25%.

The SNB had put in place the peg with the euro in 2011 after the franc had become the currency choice for many investors who were seeking a safe haven from the rising turmoil in the euro zone.

U.S. Movers

Bank of America Corp ((BAC)) dropped 2.4% or 39 cents to $15.65 after the bank reported total interest income in the fourth-quarter ending in December declined 11.4% to $12.15 billion from a year ago period.

Net income in the quarter plunged 13.8% to $2.74 billion or 25 cents a diluted share compared to $3.18 billion or 29 cents from the same quarter last year.

BlackRock, Inc ((BLK)) gained 69 cents to $346.44 after the investment company said revenues in the fourth-quarter ending in December was flat at $2.78 billion from a year ago period.

Net income in the quarter fell 3% to $813 million or $4.77 a diluted share compared to $841 million or $4.86 from the same quarter last year.

Citigroup Inc ((C)) slipped 2.6% or $1.26 to $47.79 after the diversified financial services provider reported revenues in the fourth-quarter ending in December edged up 0.2% to $17.81 billion from a year ago period.

Net income in the quarter tumbled 86% to $350 million or 6 cents a diluted share compared to $2.5 billion or 77 cents from the same quarter last year.

The bank reported legal and related expenses and repositioning charges in the current quarter to $3.5 billion compared to $1 billion in the prior year period.

European Markets

In London trading, FTSE 100 index gained 0.9% or 58.48 to 6,446.94 and in Frankfurt the DAX index climbed 2% or 194.94 to 10,012.02.

In Paris, CAC 40 index jumped 1.8% or 77.52 to 4,300.76.

After the SNB move, exporting companies like Holcim Ltd and Swatch dropped as much as 15% along with the plunge in market index. Julius Bear, Group Ltd plunged 12%, Credit Suisse Group AG and UBS Group AG dropped 11%.

SMI index, dropped as much as 14% before recovering close down 10.2% to 8,262.47.

Compagnie Financiere Richemont SA tumbled 15.3% to 75.15 Swiss francs after the Switzerland-based luxury goods maker reported sales in the third-quarter jumped 4% to €3.05 billion from €2.94 billion a year ago period.

The luxury goods maker said sales from Europe climbed 10% to €1.19 billion and from America region surged 14% to €547 million while in the Asia Pacific region declined 5% to €1.07 billion and from Japan dropped 2% to €242 million from a year ago period.

Retail sales in the quarter jumped 5% to €1.74 billion and wholesale sales increased 2% to €1.31 billion from the same period a year ago.

Asian Markets

Market indexes in Tokyo soared more than 1.4% after the yen fell from its strongest level in the year.

Tire and rubber makers soared on the expectations of earnings boost from the sharp fall in oil price below $50 a barrel. Producer price index decline accelerated in December.

Stocks in Japan soared and wholesale price index decline accelerated in December and export and import price index fell more than expected.

Market indexes staged a rally after the yen eased from its strongest level in the year and energy producers gained after a slight advance in international price of oil.

The Bank of Japan said producer price index in December slipped 0.4% to 104.8 from the downwardly revised decline of 0.2% in November.

For the year, wholesale price index in December jumped 1.9% from a year ago month.

Export prices in December fell 0.7% and dropped 2.7% from a year ago month while import prices declined 3.2% in the month and plunging 9% from a year ago month.

The Cabinet Office said core machinery orders in November edged up 1.3% from the previous month to 788 billion yen

In November, orders from the manufacturing sector declined 7% to 319.8 billion yen while those from non-manufacturers eked out a 0.5% increase to 444.9 billion yen.

The department said total orders including domestic public sector and abroad plunged 10.4% to 2.02 trillion yen.

The Nikkei 225 Stock Average climbed 312.74 or 1.9% to 17,108.70 and the broader Topix index jumped 18.62 or 1.4% to 1,376.60.

The yen weakened to 117.85 against one dollar.

In Mumbai trading, Sensex Index climbed 728.73 or 2.7% to close at 28,075.55. The CNX Nifty jumped 216.60 or 2.6% to 8,494.15.

Market indexes in India soared after an unexpected rate cut of 25 basis points.

Reserve Bank of India lowered its reference rate to 7.75% from 8% and the central bank Governor Raghuram G. Rajan cited easing inflationary pressure and the sharp fall in international price of oil.

Indian rupee strengthened for the third day in a row to 62.08 as oil price declined 22% in international markets in the first two weeks of trading following 48% loss in 2014.

Bajaj Auto Limited jumped 2.3% to Rs 2,417.95 after the second largest two-wheeler maker reported net in the third-quarter fell4.78% to Rs 816.24 crore.

Revenues jumped 10.24% to Rs 5,657.17 crore.

Bajaj Finserv Limited advanced 1.9% to Rs 1,287 after the conglomerate lender said net in the third-quarter climbed 23.6% to Rs 347.37 crore.

Net Revenues soared 36.7% to Rs 1,905.34 crore.

Bharat Petroleum Corporation Limited gained 1.6% to Rs 662.40 and the central government controlled oil marketing company plans to expand capacity at Bina refinery in Madhya Pradesh to 15 million tons at cost of about Rs 23,000 crore.