U.S. Stocks Fall; New Record in Gold

Mukesh Buch
24 Nov, 2009
New York City

U.S. stocks declined and gold surged to a new high on the weakness in dollar. Fed minutes showed that officials worried that lowering interest rates may lead to excessive speculation. The third quarter economic growth was revised lower to 2.8%.

[R]4:30 PM New York, 9:30 PM London, 8:30 AM Sydney – U.S. stocks declined and gold surged to a new high on the weakness in dollar. Fed minutes showed that officials worried that lowering interest rates may lead to excessive speculation. However, the officials lifted the growth outlook and lowered their views on unemployment. The third quarter economic growth was revised lower to 2.8%.[/R]

U.S. stocks edged lower after the third quarter economic growth estimate was lowered to 2.8% from 3.5%. Metropolitan home prices increased at a slower pace in September, fourth monthly increase in a row. The index is still 9.36% lower from a year ago.

Federal Reserve officials worried that lowering interest rate further may spark “excessive” speculation and low interest rate for an extended period may have some “negative side effects.” The minutes of meeting on Nov 3 and 4 showed that officials worried that low interest rate may set off higher inflation expectations in the long term.

The members of the rate setting committee estimated economy to shrink at 0.25% annual rate in the fourth quarter of 2009 and then expand at 3% in the same quarter in 2010.

The committee now projects the economy to grow at 2.5% to 3.5% in 2010 and shrink between 0.1% and 0.4% in 2009.

In the previous estimate in June the committee had forecasted economy to decline between 1% and 1.5% in 2009 and rise between 2.5% and 3.5% in 2010.

The Fed officials also estimated unemployment to hover between 9.3% and 9.7% in the fourth quarter of 2010 and compared to previous estimate of 9.8%.

European markets closed lower and banks led the decliners in the region. The confidence index increased in Germany and was unchanged in France. Daimler AG signs two joint venture agreements with a Russian truck maker.

UK stocks closed lower tracking the weakness in metals and commodities. Lloyds of London plans to raise £13.5 billion in the largest rights offering in the UK. De La Rue plc, the commercial printer declined after its net dropped 90%.

Banks in Japan closed lower on the worries that more capital will be needed to meet regulatory requirements. Talks of deflation rattled investors. Mitsubishi UFJ Financial Group Inc plans $11 billion offering for the second time this year. The troubled airline JAL restructuring face hurdles.

Stocks in Mumbai traded lower. Hindalco plans to raise as much as $580 million. Reliance Industries declined as investors question the benefits of acquiring bankrupt LyondellBasell to shareholders. Rupee traded lower to 46.57 against the dollar.

Australian stocks declined tracking losses in metals and commodities prices. BHP Billiton is in advanced stages to sell its closed nickel mining operation for as much as $500 million. Woodside lowers its production target in the current year by 7%.

North American Markets

Dow Jones Industrial Average decreased 17.24 or 0.2% to a close of 10,433.71, S&P 500 Index edged lower 0.59 or 0.05% to 1,105.65, and Nasdaq Composite Index declined 6.83 or 0.3% to close at 2,169.18. Toronto TSX Composite Index decreased 84.39 or 0.7% to 11,539.63.

Of the stocks in S&P 500 index, 442 increased, 57 declined and 1 was unchanged.

The Interpublic Group of Companies, Inc led the decliners in the S&P 500 index with a loss of 3.5% followed by losses in Zions Bancorporation of 3.4%, in Fifth Third Bancorp of 2.6%, in Rowan Companies, Inc of 2.5% and in Dell Inc of 2.4%.

Medtronic, Inc led gainers in the S&P 500 index with a rise of 7.1% followed by gains in Analog Devices, Inc 7.0%, in St. Jude Medical, Inc of 3.4% and in Tellabs, Inc of 3.3%.

South American Markets Indexes

Mexico Bolsa Index decreased 164.18 or 0.5% to 30,961.99 and Brazil Bovespa Stock Index added 507.60 or 0.8% to 67,317.00.

Argentina Merval Index decreased 0.2% and Chile Stock Market Select index declined 0.5% and Colombia IGBC General Index increased 0.4% and in Peru Lima General Index decreased 1%.

Europe Markets Review

In London FTSE 100 Index closed lower 31.54 or 0.59% to 5,323.96, in Paris CAC 40 Index decreased 28.55 or 0.75% to close at 3,784.62, in Frankfurt DAX index lower 32.17 or 0.55% to close at 5,769.31. In Zurich trading SMI decreased 12.71 or 0.20% to close at 6,397.53.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 96.10 or 1.01% to 9,401.58, and Hang Seng index in Hong Kong decreased 348.25 or 1.53% to 22,423.14, and CSI 300 index in China lower 117.43 or 3.20% to 3,548.08. ASX 200 index in Australia decreased 32.00 or 0.68% to 4,685.00. The FTSE Bursa KL Composite index in Malaysia was higher 1.21 or 0.10% to 1,272.09.

The Kospi Index in South Korea decreased 12.63 or 0.78% to close at 1,606.42. SET index in Thailand closed lower 14.19 or 2.06% to 676.22. JSE Index in Indonesia decreased 9.53 or 0.38% to 2,471.88. The Sensex index in India decreased 49.10 or 0.29% to 17,131.08.

Commodities, Metals, and Currencies

Crude oil decreased $1.71 to $75.85 a barrel for a front month contract, natural gas edged declined 3 cents to $4.76 per mBtu and gasoline decreased 4.74 cents to 193.20 cents.

Soybean future closed up 4.00 cents to $10.46 a bushel. Wheat futures closed down 25 cents in Chicago trading to $5.45 a bushel. Sugar closed lower 0.06 cent 22.08 cents.

Gold increased $4.10 in New York trading to close at $1,170.30 per ounce, silver closed up $0.08 to $18.56 per ounce and copper for the front month delivery decreased 0.30 cent to $3.16 per pound.

Dollar closed unchanged against euro to $1.496 and edged lower against the Japanese yen to 88.02.

Yield on 10-year U.S. bonds decreased to 3.30% and with 30-year maturities closed down at 4.25%.