Ahead Fed Meeting, Bond Auction Stocks Fall

Mukesh Buch
21 Sep, 2009
New York City

U.S. and world stocks fell ahead of 2-day Fed meeting and the beginning of $112 billion government bond auction. The dollar climbed and crude oil and god futures fell. AIG surged on the expectations of relaxed terms of bailout and Bank of America refused to send documents to a lawmaker

[R]4:30 PM New York, 9:30 PM London, 6:30 AM Sydney – U.S. and world stocks fell ahead of 2-day Fed meeting and the beginning of $112 billion government bond auction. The dollar climbed and crude oil and god futures fell. AIG surged on the expectations of relaxed terms of bailout and Bank of America refused to send documents to a lawmaker’s committee.[/R]

There is a growing perception among investors around the world that market valuations are ahead of economic fundamentals. A sudden and sharp pullback in indexes are possible if a whiff of economic slowdown is reported either in economic numbers of earnings scheduled to be released in 15 days.

Ahead of Fed 2-day Fed meeting, bonds edged lower and 10-year inched higher as U.S. Treasury prepared $112 billion bond auction this week with $43 scheduled tomorrow.

U.S stocks edged lower as home builders and resource stocks traded lower. European and Asian markets declined on the worries that world market valuations are ahead of economic fundamentals.

Dell Inc declined after it agreed to acquire Perot Systems for $3.9 billion. Perot Systems surged 66%. Lennar dropped after it reported wider than expected loss and dragged other home builders lower. Moody’s declined after it did not agree to attend regulator hearing scheduled next week.

American International Group Inc surged after the House Oversight and Government Reform Committee may relax the terms of government rescue package. Separately Bank of America turned downed the request from the Committee on documents about ‘legal advice’ it received regarding escalating losses at Merrill Lynch during its merger.

UK stocks declined as commodities and the pound fell. Land Securities agreed to sell its one third holding in Bullring mall in Birmingham. PetroNeft plans to raise $27.50 million. Royal Bank of Scotland is planning multi-billion dollar issue to raise capital.

European markets declined for the second day in a row. Resource stocks led the decline after commodities and crude oil futures fell. Areva received several bids for its transportation and distribution unit. Daimler expects profit in the second half. Parmalat and K+S declined.

North American Markets

Dow Jones Industrial Average decreased 41.34 or 0.4% to a close of 9,778.86, S&P 500 Index decreased 3.64 or 0.3% to 1,064.66, and Nasdaq Composite Index increased 5.18 or 0.2% to close at 2,138.04. Toronto TSX Composite Index declined 21.34 or 0.2% to 11,424.61.

Of the stocks in S&P 500 index, 149 increased, 345 declined and 6 was unchanged.

Moody’s Corporation led the decliners in the S&P 500 index with a loss of 5.7% followed by losses in Johnson Controls of 4.2%, in Dell Inc of 4.1%, in State Street Corp of 3.9% and in Goodyear Tire of 3.7%.

AIG led gainers in the S&P 500 index with a rise of 21.3% followed by gains in Apollo Group of 8.3%, in E*Trade Financial of 8.2% and in Tellabs Inc of 8.1%.

South American Markets Indexes

Mexico Bolsa Index decreased 334.84 or 1.1% to 29,607.16 and Brazil Bovespa Stock Index increased 225.01 or 0.4% to 60,928.02.

Argentina Merval Index closed down 1.1% and Chile Stock Market Select index closed unchanged, Peru Lima General Index edged up 0.04% and Colombia IGBC General Index decreased 0.6%.

Europe Markets Review

In London FTSE 100 Index closed lower 38.53 or 0.74% to 5,134.36, in Paris CAC 40 Index decreased 15.68 or 0.41% to close at 3,812.16, in Frankfurt DAX index lower 35.18 or 0.62% to close at 5,668.65. In Zurich trading SMI decreased 18.92 or 0.30% to close at 6,306.23.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 73.26 or 0.70% to 10,370.54, Hang Seng index in Hong Kong decreased 150.60 or 0.70% to 21,472.85 and CSI 300 index in China higher 8.92 or 0.28% to 3,208.60. ASX 200 index in Australia decreased 15.80 or 0.34% to 4,677.40. The Nikkei 225 Index in Tokyo, The FTSE Bursa KL Composite index in Malaysia was closed today.

The Kospi Index in South Korea decreased 4.21 or 0.25% to close at 1,695.50. SET index in Thailand closed lower 0.51 or 0.07% to 713.16. JSE Index in Indonesia and The Sensex index in India was closed today.

Commodities, Metals, and Currencies

Crude oil decreased $2.56 to $69.48 a barrel for a front month contract, natural gas edged down 16 cents to $3.61 per mBtu and gasoline decreased 8.17 cents to 175.07 cents.

Wheat futures closed down 1.25 cents in Chicago trading to $4.56 a bushel. Sugar edged down 0.02 cents a pound to 23.22 cents. Soybean future closed down 27.50 cents to $9.13 a bushel.

Gold decreased $5.30 in New York trading to close at $1,005.00 per ounce, silver closed down $0.20 to $16.87 per ounce and copper for the front month delivery increased 2.45 cent to $2.80 per pound.

Dollar edged higher against euro to $1.467 and closed higher against the Japanese yen to 92.02.

Yield on 10-year U.S. bonds increased to 3.48% and with 30-year maturities was increased to 4.23%.