S&P 500, Nasdaq Down 2%; Selloff in Banks

Mukesh Buch
01 Sep, 2009
New York City

Financials led the decliners in the U.S. trading as broader indexes closed lower 2%. World markets have been in a retreat for two days and today markets in Europe and Americas declined on valuation worries and impending losses in financial system. AIG plunged 21% and Wells Fargo, Citigroup declined.

[R]4:30 PM New York, 9:30 PM London, 6:30 AM Sydney – Financials led the decliners in the U.S. trading as broader indexes closed lower 2%. World markets have been in a retreat for two days and today markets in Europe and Americas declined on valuation worries and impending losses in financial system. AIG plunged 21% and Wells Fargo, Citigroup and other banks were among the most active stocks.[/R]

For more than a month, global markets have been ahead of market fundamentals and analysts and investors from China to London to New York have warned that market correction is inevitable. Financials fell sharply as large banks, regional banks and brokerage houses led the decliners in trading.

Broader indexes in New York trading fell nearly 2% and indexes in Europe declined between 1.5% and 2%. Commodities like crude oil, natural gas and wheat fell but sugar hovered near three-decade high. Natural gas is trading near five-year low.

Of the stocks in the S&P 500 index, 95% declined.

But it was the worries related to financials that set the caution in trading. In other news, index of manufacturing suggested an expansion in August and an index of pending home sales showed a record increase.

eBay after struggling for four years to realize synergies between the action market operations and communication company Skype agreed to sell a majority stake. The consortium of investors agreed to pay $2 billion for 65% stake in Skype. Earlier eBay had planned to spinoff Skype in a public offering.

American International Group led the decliners in the S&P 500 index with a loss of 8.8%. Benihana Inc first quarter net plunges. China Medical Technologies first quarter net fell 96%. Sina Corp second quarter net income falls. Rambus declined after California Court delayed the anti-trust case trial.

European market indexes edged lower. Areva SA first half net plunges 79%. Vivendi first half revenues rose 17%. French new cars registration increased 7% in August on €1,000 rebate. Fresenius declined after negative comments from an analyst. Vinci agreed to acquire electric contractor Cegelec SA for €1.2 billion from Qatar fund.

Unemployment in euro zone increased to 9.5% in July, the highest since in May 1999 according to the latest release from Eurostat in Luxembourg. The jobless rate in June was estimated at 9.4%.

The statistics office estimated approximately 22 million people are without jobs in the wider zone of 27 nations of the European Union and rate of unemployment increased to 9% in the month from 8.9% in June.

UK stocks turned lower in the late afternoon on the weak sentiment in the U.S. trading. Lower metals and oil prices also contributed to the declines. RSA Insurance Group is looking to raise $1 billion. AstraZeneca reported better results during trials using Brilinta to treat heart attacks.

Reserve Bank of Australia left its key lending rate unchanged at 3% and the bank cited the global economic stimulus and rising commodities prices. Manufacturing expanded in August and new dwelling constructions approvals increased in July.

Australia after months of violence against Indian students stepped up its diplomatic offensive. Deputy Prime Minister Julia Gillard on a five-day visit to India stressed that Australia is safe and welcoming place failed to cite concrete evidence of her government’s efforts that protect all students.

North American Markets

Dow Jones Industrial Average decreased 185.68 or 2% to a close of 9,310.60, S&P 500 Index decreased 22.58 or 2.2% to 998.04, and Nasdaq Composite Index edged lower 40.17 or 2% to close at 1,968.89. Toronto TSX Composite Index decreased 178.43 or 1.64% to 10,689.78.

Of the stocks in S&P 500 index, 25 increased, 470 declined and 5 were unchanged.

American International Group, Inc led the decliners in the S&P 500 index with a loss of 20.6% followed by losses in E*Trade Financial Corporation of 14.8%, in Genworth Financial of 13.8%, in Hartford Financial of 11.3% and in CB Richard Ellis of 9.5%.

Baker Hughes Inc led gainers in the S&P 500 index with a rise of 2.9% followed by gains in Eastman Kodak 2.4%, in BJ Services of 2.4% and in Coach Inc of 2.2%.

South American Markets Indexes

Mexico Bolsa Index decreased 380.79 or 1.4% to 27,749.16 Brazil Bovespa Stock Index decreased 674.02 or 1.2% to 55,814.96.

Argentina Merval Index closed down 2.2% and Chile Stock Market Select index edged lower 1.4%, Peru Lima General Index edged lower 1.5% and Colombia IGBC General Index fell 2.5%.

Europe Markets Review

In London FTSE 100 Index closed lower 89.20 or 1.82% to 4,819.70, in Paris CAC 40 Index decreased 70.10 or 1.92% to close at 3,583.44, in Frankfurt DAX index lower 137.32 or 2.51% to close at 5,327.29. In Zurich trading SMI decreased 88.95 or 1.43% to close at 6,128.17.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 37.53 or 0.36% to 10,530.06, Hang Seng index in Hong Kong increased 148.11 or 0.75% to 19,872.30 and CSI 300 index in China higher 13.43 or 0.47% to 2,843.70. ASX 200 index in Australia increased 35.50 or 0.79% to 4,514.60. The FTSE Bursa KL Composite index in Malaysia closed lower 2.99 or 0.25% to 1,171.28.

The Kospi Index in South Korea increased 31.21 or 1.96% to close at 1,623.06. SET index in Thailand closed higher 0.87 or 0.13% to 654.12 and JSE Index in Indonesia decreased 14.62 or 0.62% to 2,326.91. The Sensex index in India decreased 115.45 or 0.74% to 15,551.19.

Commodities, Metals, and Currencies

Crude oil decreased $1.70 to close at $68.26 a barrel for a front month contract, natural gas closed down 15 cents to $2.82 per mBtu and gasoline decreased 2.49 cents to 178.50 cents.

Wheat futures closed down 11.50 cents in Chicago trading to $4.87 a bushel. Sugar edged down to 24.24 cents a pound. Soybean future closed down 24.00 cent to $9.55 a bushel.

Gold increased $4.90 in New York trading to close at $958.40 per ounce, silver closed up $0.09 to $15.02 per ounce and copper for the front month delivery decreased 2.10 cent to $2.805 per pound.

Dollar edged higher against euro to $1.42 and closed lower against the Japanese yen to 92.88.

Yield on 10-year U.S. bonds decreased at 3.36% and with 30-year maturities edged higher to 4.19%.