Stock Market News for May 3, 2010 - Market News
U.S. stocks closed sharply lower on the last trading day of the month after investors decided to pull money out of the market, worried by reports of a criminal investigation against Goldman Sachs. At least two firms, prompted by reports of the criminal probe, cut their ratings on the investment bank, further aiding to the broad based decline.
Goldman (NYSE:GS), already facing civil fraud charges, plunged almost 10% after reports surfaced that the Justice Department had begun a criminal probe into the bank’s dealings. Standard & Poor’s slashed its rating on the stock to "sell" while Bank of America/Merrill Lynch took its rating on Goldman to "neutral" from "buy." Goldman-related worries weakened financial stocks and sent shares in Morgan Stanley (NYSE:MS) down 3.5% while Citigroup (NYSE:C) dropped 4.2%. Shares in J.P. Morgan (NYSE:JPM) closed down 3.2%.
Stocks swung between gains and losses in the early going, but the rating downgrades sent shares deep into the negative territory. The Dow average lost 158.71 points, or 1.4%, to close at 11,008.61. The Standard & Poor's 500 index dropped 20 points, or 1.7%, to 1,186.69 and the tech-heavy Nasdaq composite index fell 51 points, or 2%, to 2,461.19. On the New York Stock Exchange two stocks fell in price for every one that rose on volume of about 1 billion shares.
Prospects of increased financial regulation and the instability in the eurozone markets sent the market’s measure of volatility, the CBOE Vix, soaring more than 32% to 22.05.
Nevertheless, Warren Buffett's assessment that he was seeing real signs of improvement in the US economy, as well as his support for Goldman was welcomed by investors. The Berkshire Hathaway (NYSE:BRK.A) boss stressed the intense criticism surrounding the investment bank was unwarranted. So hopes grew stronger that the charges were more at the individual level. This week Goldman’s CEO addresses shareholders at its annual meeting.
Last week's earnings numbers were generally better than expected. Big names that surprised analysts were: Caterpillar (NYSE:CAT), Dow Chemical (NYSE:DOW), DuPont (NYSE:DD), Ford (NYSE:F), 3M (NYSE:MMM), Procter & Gamble (NYSE:PG), Texas Instruments (NYSE:TXN), US Steel (NYSE:X), Visa (NYSE:V).
This morning the European Central Bank suspended its minimum credit rating limits for Greek government-backed assets used in ECB liquidity-providing operations. Germany also approved a legislation to provide $11 billion in aid to Greece, with reports suggesting Athens could start getting the money within a week.
Among this week's key corporate earnings reports are results from Merck (NYSE:MRK), Pfizer (NYSE:PFE) and Kraft (NYSE:KFT).
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