FEBRUARY 8, 2010, 4:17 P.M. ET
A slump in financial stocks sent the Dow Jones Industrial Average to its first close below 10000 in three months as concerns about the global economy and U.S. interest-rate policy simmered.
The blue-chip measure fell 103.84 points, or 1%, to 9908.39, near its intraday low in a session that saw selling accelerate into the closing bell. The Dow was led lower by a 3.5% decline in Bank of America, while American Express fell 2.8%, Travelers fell 2.5%, and J.P. Morgan Chase fell 1.6%.
Investors weighed a report in The Wall Street Journal that Federal Reserve Chairman Ben Bernanke will begin laying the groundwork for credit tightening later in the year, bringing to a close a period of historically low interest rates that have made it easier for ailing banks to book big profits.Market participants also kept a close eye on financial instability in Europe, where issues surrounding the creditworthiness of several countries have recently surfaced, sending shockwaves through the financial markets.
The Dow slipped below 10000 in each of the previous two trading sessions but in each case was rescued from a finish below the milestone as bargain hunters swooped in before the closing bell.
Traders said that the round-number level, which the Dow has repeatedly crossed over the past decade, still carries some psychological significance in its own right. Under the current circumstances, many are also curious whether it might be a stepping stone on the way to a 10% correction for the market, which many Wall Street veterans say is overdue.
The Dow is now down 7.6% from its 15-month high set on Jan. 19.
"This is the first time in three months that I think we've moved into a lower trading range," said portfolio manager Uri Landesman, of ING Investment Management. "Clearly, the sovereign-debt worries are first and foremost for the market right now. We're going to need some more clarity on that before we establish a new trend."
Keith W. Springer, president of Capital Financial Advisory Services, noted that market watchers had been saying for months that a pullback has been necessary, but now that the rally in stocks has come to a pause for several weeks, it has been met with increased fear and concern.
"Every time you have a market run-up everybody goes, 'We need a 10% correction,' and as soon as the market drops 5%, you have everybody crying," Mr. Springer said.
The S&P fell 0.9% to 1056.74, led by a 2.2% decline in its financial category. All its other sectors posted declines as well, with the industrials, materials, and utilities categories down more than 1% each.
The Russell 2000 declined 1.1%. The technology-heavy Nasdaq Composite fell 0.7%.
Among stocks to watch, Rubbermaid rose 1.7% after Morgan Stanley lifted its investment rating on the stock to "overweight" from "equal weight."
Home Depot rose 2.2% after Morgan Stanley upgraded the home-improvement chain's shares to an "overweight" rating from "equal weight."
Hasbro leapt 12.7% after the toy company posted a 77% jump in fourth-quarter profit, exceeding analysts' forecasts. Hasbro also said it expects to grow revenue and earnings this year.
CIT Group slipped 0.5% after the commercial lender named ex-Merrill Lynch CEO John Thain as its new leader.
CVS Caremark jumped 5.3% after the pharmacy-services company reported an 11% rise in net profit, topping expectations.
United Parcel Service fell 1% after announcing plans to furlough at least 300 of its pilots, citing a continued need for belt-tightening due to the slow pace of the U.S. economic recovery.
In other markets, the dollar weakened against both the euro and the Japanese yen. Crude-oil futures climbed and gold futures rose, snapping a three-day losing streak. Treasurys were little changed, with the 10-year note off 1/32 to yield 3.573%.
—Kristina Peterson and Donna Kardos Yesalavich contributed to this article..
FEBRUARY 4, 2010, 5:00 P.M. ET
Fears about the global economy and sovereign credit hammered stocks Thursday, causing the Dow Jones Industrial Average to briefly cross below 10000, though it settled slightly above the mark.
Other markets gyrated as well, with commodities reeling while Treasury prices and the dollar rose as investors sought safety.
The Dow fell 268.37 points, its worst one-day point slide since April 20, 2009. The measure was off 2.6% for the day to end at 10002.18, a three-month low.
Throughout the day, investor fretted over signs that Europe's governments are struggling to finance their debts and that America's employment picture may not be improving as much as expected.
"We may be in a run-for-the-hills scenario," in the sovereign-debt markets, said Ben Inker, director of asset allocation at the portfolio-management firm GMO. "You really do have to ask the question, what is the purpose of government bonds in my portfolio? If their purpose is to be the low-risk asset, what do we do if we don't see them as low-risk and there aren't yields to compensate us for that?"
In the credit markets, the cost of insuring the debt of eurozone members with large budget deficits against default rose, dashing hopes that the European Commission's qualified endorsement of Greece's budget plan would calm investor fears.
The moves followed news that the European Commission had put Greece under more pressure to cut its deficit; that the Portuguese government sold only €300 million ($417 million) of treasury bills at an auction, compared with an indicative offer of €500 million; and that the Spanish government had raised its budget deficit forecasts for 2010 through 2012.
Worries about Europe caused the euro to hit an eight-month low against the dollar. That helped to propel the broad U.S. Dollar Index to trade 0.7% higher.
"Anyone who thought the euro was going to be the next reserve currency has got to be questioning that this week," said Duncan Richardson, executive vice president at Eaton Vance Management in Boston. "It's not ready for prime time yet."
In U.S. economic news, initial claims for jobless benefits unexpectedly rose last week. The four-week moving average, which aims to smooth volatility in the data, also increased, sending a troublesome signal ahead of monthly payrolls data due Friday morning.
Twenty-nine of the Dow's 30 components fell, with Bank of America suffering the most, off 5% after New York Attorney General Andrew Cuomo filed civil securities fraud charges against former bank executives Kenneth Lewis and Joseph Price over their handling of the Merrill Lynch acquisition.
The only Dow stock to post gains was Cisco Systems, up 0.4% as investors responded to a better-than-expected profit report.
The Nasdaq Composite Index was off 2.9%. The S&P 500 fell 3.1%, hurt by declines in every sector. Financials were the weakest, off 4.2% as a group.
MasterCard slid 10.3% after the credit-card issuer reported a smaller than expected rise in quarterly earnings. Visa, which reported results after the close on Wednesday, gained 0.6% as its results bested analysts' forecasts.
The Chicago Board Options Exchange's Volatility Index, which measures investors' nervousness about upcoming market swings, leapt 20.9%.
The dollar's bounce hurt the prices of commodities traded globally in terms of the U.S. currency. Oil futures slid fell $3.84 a barrel, or 4.99% to $73.14 in New York, the lowest settlement since Jan. 29 and the biggest one-day loss in crude since July 29. Gold contracts fell almost $47 to $1,065.50 per ounce. The Dow Jones-UBS Commodity Index was off 2.2%.
Treasury prices climbed, with the 10-year note up 26/32 to yield 3.606%.
—Donna Kardos Yesalavich and Kristina Peterson contributed to this article.Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold
Feb. 4 (Bloomberg) -- Stocks plunged around the globe, with the MSCI World Index dropping the most in four months, and commodities tumbled on concern an unexpected increase in U.S. jobless claims and growing sovereign debt will derail the economic recovery. The euro slid to the lowest level since May.
The MSCI World Index of 23 developed markets sank 2.4 percent, the most since Oct. 1, while the Standard & Poor’s 500 Index fell 2.4 percent at 2:31 p.m. in New York and benchmark equity indexes for Brazil, Portugal and Spain plummeted the most in at least 11 months. Oil lost 5 percent, the biggest drop in six months, and gold tumbled the most since 2008 as a stronger dollar curbed demand for commodities as alternative investments. The euro sank 1 percent to $1.3759, the lowest since May 21.
U.S. equities added to the global slide as initial applications for unemployment insurance unexpectedly increased to 480,000 last week and companies from MasterCard Inc. to Monster Worldwide Inc. reported earnings that trailed analyst estimates. European shares extended earlier declines triggered when a disappointing Spanish bond auction added to concern some European nations will struggle to finance their budget deficits.
“Look at those initial claims,” said Diane Garnick, a New York-based investment strategist at Invesco Ltd., which manages $400 billion. “Unemployed people don’t spend money. That means the growth we’ve seen is not sustainable until people get jobs. Also, there are lots of uncertainties on a global basis. That’s certainly negative news for the market. I wouldn’t be surprised if we started to see dramatic increases in volatility again.”
Stocks Sink
Retreating shares in the MSCI World outnumbered rising stocks by almost six to one and by 16 to one on the New York Stock Exchange. Only 17 companies in the S&P 500 advanced and all but one of the 30 stocks in the Dow Jones Industrial Average declined. Monster Worldwide Inc., which offers help-wanted advertisements on the Internet, plunged 16 percent in its biggest decline since 2002. MasterCard lost 8.6 percent, the most since May 2009.
Brazil’s Bovespa index slumped as much as 5 percent as every company in the 63-stock gauge retreated.
Treasuries gained as investors fled to assets perceived as being the most safe, sending the yield on the benchmark 10-year note down 10 basis points to 3.61 percent.
The rally in U.S. government debt came even as Nassim Nicholas Taleb, author of “The Black Swan,” said “every single human being” should bet U.S. Treasury bonds will decline, citing the policies of Federal Reserve Chairman Ben S. Bernanke and the Obama administration.
‘No Brainer’
It’s “a no brainer” to sell short Treasuries, Taleb, a principal at Universa Investments LP in Santa Monica, California, said at a conference in Moscow today. “Every single human being should have that trade.”
Warren Buffett’s Berkshire Hathaway Inc. was stripped of its last AAA credit rating by Standard & Poor’s after the billionaire investor agreed to buy railroad Burlington Northern Santa Fe Corp. Berkshire, which is taking on debt to fund the $26 billion takeover, was cut to AA+ from S&P’s highest grade, the ratings firm said today in a statement. The downgrade concludes a review that S&P announced on Nov. 4, the day after Berkshire disclosed the deal for Burlington Northern. The company’s Class B shares slid 2.3 percent.
Europe’s Dow Jones Stoxx 600 Index sank 2.7 percent, the most since November, as national benchmarks from Britain to Germany tumbled more than 2 percent. Portugal’s PSI-20 Index slumped 5 percent and Spain’s IBEX 35 slid 5.9, the biggest plunges in 15 months for both.
Deficit Concerns
Greece’s ASE Index lost 3.3 percent on concern plans for a strike by the country’s biggest union show Prime Minister George Papandreou may not win enough support in parliament for spending reductions.
The European Union’s pledge yesterday to back Greece’s plan to cut the region’s biggest budget deficit prompted investors to shun securities of countries with the worst shortfalls.
Portugal led declines in government bonds, with the premium investors demand to hold the nation’s two-year securities instead of benchmark German bunds widening to 156 basis points, the biggest difference since 1997. Spain sold 2.5 billion euros ($3.5 billion) of three-year securities today to yield 2.63 percent, compared with 2.14 percent the last time the notes were issued Dec. 3.
Banco Santander SA, the biggest Spanish bank, slumped 9.4 percent.
Credit-default swaps on Portugal’s government debt soared 27 basis points to a record 223, according to CMA DataVision prices. Contracts on Greece jumped 14 basis points to 411.5, Spain increased 13 basis points to 165, Italy was up 7 at 138 and Ireland climbed 6.5 basis points to 169.5.
‘Focus Is Shifting’
“The focus is shifting toward Spain and Portugal, where the deficit-reduction plans have been far less ambitious than Greece,” said Kornelius Purps, a fixed-income strategist in Munich at UniCredit Markets & Investment Banking.
European Central Bank President Jean-Claude Trichet said he is “confident” that Greece is moving in the right direction to cut its deficit. He spoke at a press briefing after the ECB left its benchmark interest rate unchanged at a record 1 percent.
The MSCI Emerging Markets Index dropped 2.8 percent, snapping a three-day rally. Poland’s WIG 20 Index fell 3.9 percent after the European Commission said the government’s budget gap may widen to a 15-year high of 7.5 percent of gross domestic product in 2010, from 6.4 percent last year, without “sizeable” measures.
The dollar gained against 15 of 16 major counterparts, adding at least 1.5 percent versus the Brazilian real, New Zealand dollar and South African rand. The Dollar Index, which tracks the U.S. currency against those of six major trading partners, climbed 0.6 percent to 79.876, the highest since July.
Gold fell the most since 2008, with April futures losing 4.1 percent to $1,066.60 an ounce in New York.
Crude oil for March delivery fell 5.6 percent to $72.68 a barrel, headed for the biggest daily drop since July 29.
Copper lost 3.2 percent to $2.8775 a pound in New York,
while aluminum, nickel and lead slumped at least 1.9 percent in
London.
Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold
By Rob Delaney
Feb. 4 (Bloomberg) -- Eric Sprott, whose Sprott Hedge Fund increased more than fivefold in nine years, said gold may rise to $1,500 an ounce this year and $2,000 within two years as the U.S. government takes measures to counter the credit crunch.
“With quantitative easing and the financial problems we have, I suspect that the gold price goes up from here,” Sprott said today in an interview in Toronto, where he announced financial support for Canadian athletes.
“If you tell me how much quantitative easing there is, I’ll tell you where the gold price will go, but I have no trouble imagining we get to $1,500 this year and to $2,000 in two years.”
Sprott said in a Dec. 18 interview that the Standard & Poor’s 500 Index will collapse below its March lows as an expected rebound in economic growth fails to materialize. Gold rose 22 percent in New York in the two years ended yesterday as investors bought the precious metal as a safe haven during the global economic recession.
Gold futures for April delivery fell $44.30, or 4 percent, to $1,067.70 an ounce at 12:01 p.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest decline since Dec. 4.
Sprott’s C$1.39 billion ($1.3 billion) Sprott Canadian Equity Fund, which has gained about 18 percent in the past six
months through yesterday, has 34 percent of its portfolio in
mining stocks and another 39 percent in bullion as of Nov. 30.
Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold
Thursday, February 4, 2010provided by
Don't look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system.
A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits.
Instead of helping to finance the rest of the government, as it has done for decades, our nation's biggest social program needs help from the Treasury to keep benefit checks from bouncing -- in other words, a taxpayer bailout.
No one has officially announced that Social Security will be cash-negative this year. But you can figure it out for yourself, as I did, by comparing two numbers in the recent federal budget update that the nonpartisan CBO issued last week.The first number is $120 billion, the interest that Social Security will earn on its trust fund in fiscal 2010 (see page 74 of the CBO report). The second is $92 billion, the overall Social Security surplus for fiscal 2010 (see page 116).
This means that without the interest income, Social Security will be $28 billion in the hole this fiscal year, which ends Sept. 30.
Why disregard the interest? Because as people like me have said repeatedly over the years, the interest, which consists of Treasury IOUs that the Social Security trust fund gets on its holdings of government securities, doesn't provide Social Security with any cash that it can use to pay its bills. The interest is merely an accounting entry with no economic significance.
Social Security hasn't been cash-negative since the early 1980s, when it came so close to running out of money that it was making plans to stop sending out benefit checks. That led to the famous Greenspan Commission report, which recommended trimming benefits and raising taxes, which Congress did. Those actions produced hefty cash surpluses, which until this year have helped finance the rest of the government.
But even then, it was clear the surpluses would be temporary. Now, years earlier than projected, Social Security is adding to the government's borrowing needs, even though the program still shows a surplus on paper.
If you go to the aforementioned pages in the CBO update and consult the tables on them, you see that the budget office projects smaller cash deficits (about $19 billion annually) for fiscal 2011 and 2012. Then the program approaches break-even for a while before the deficits resume.
Social Security currently provides more than half the income for a majority of retirees. Given the declines in stock prices and home values that have whacked millions of people, the program seems likely to become more important in the future as a source of retirement income, rather than less important.
It would have been a lot simpler to fix the system years ago, when we could have used Social Security's cash surpluses to buy non-Treasury securities, such as government-backed mortgage bonds or high-grade corporates that would have helped cover future cash shortfalls. Now it's too late.
Even though an economic recovery might produce some small, fleeting cash surpluses, Social Security's days of being flush are over.
To be sure -- three of the most dangerous words in journalism -- the current Social Security cash deficits aren't all that big, given that Social Security is a $700 billion program this year, and that the government expects to borrow about $1.5 trillion in fiscal 2010 to cover its other obligations, about the same as it borrowed in fiscal 2009.
But this year's Social Security cash shortfall is a watershed event. Until this year, Social Security was a problem for the future. Now it's a problem for the present.
Capital Gold Group, gold group, gold, gold prices, gold news, gold coins, gold bullion, gold IRA, IRA gold
