Stock Market News for May 19, 2010 - Market News

Stocks dropped sharply on Tuesday and the euro plunged to a fresh four-year low against the US dollar as Germany’s move to ban a particular type of short selling was seen as a precursor to tighter regulations.

Reports that ten European countries had sent bailout money to Greece gave some boost to the euro in early going Tuesday but the currency failed to hold on to the gains and sank to a new four-year low of $1.2160.  Germany’s announcement that it will ban “naked" short selling – a form of short selling where traders sell without borrowing the shares in advance – indicated some countries in the region are being forced to take pre-emptive measures. 

This morning the euro pulled back from a four-year low, helping stock futures wipe off deeper losses. Ahead of the bell, Dow Jones industrial average futures dropped 19 points, or 0.2%, to 10,471.  Standard & Poor's 500 index futures fell 2.20 points, or 0.2%, to 1,116.50, while Nasdaq 100 index futures fell 6.50 points, or 0.3%, to 1,881.50.

On Tuesday, the Dow Jones industrial average dropped almost 115 points, or 1.1%, to 10,510.95.  The broader S&P 500 index closed down 16 points, or about 1.4%, at 1,120.80 and the Nasdaq composite index led with a drop of 37 points, or 1.6%.  The CBOE Vix, the market’s fear gauge, surged 7% to $33.24. 

Flight to safety once again sent prices of the US Treasuries higher, sending corresponding yields to their lowest since early December.  Euro’s weakness helped the dollar gain 0.1% against a basket of currencies.  A stronger dollar sent crude prices lower, off 67 cents, for a 1% fall to $69.41, a 7-month low.  On the New York Stock Exchange, four stocks fell in price for each one that advanced.

The decline was broad based with all but one DJIA component closing the day in the red.  Only Wal-Mart WMT shares managed gains, up 1.9%, after the company reported earnings of 88 cents a share, which beat estimates of 85 cents, as growth in Mexico, Canada and China helped offset a US comparable sales drop of 1.1%.  However, the retailer warned that lingering unemployment is likely to affect its customer base and, in turn, hurt US sales trends.  Another DJIA component, Home Depot HD, dropped 2.4% despite a 41% jump in quarterly earnings and a boost to its current year sales and earnings guidance.  After Tuesday's close, Hewlett-Packard HPQ reported a 19.8% jump in second quarter earnings as revenues grew 12.4% to $30.7 billion.

All ten S&P500 industry sectors fell on Tuesday.  Financials led with a 2.8% drop after Germany's decision to restrict naked short selling of 10 leading German financial stocks.  German Finance Ministry said the ban would also extend to credit-default swaps and euro-area government bonds.  Concerns that tighter regulations would hurt revenue also had a bearing on the financial sector shares

Shares of credit card firms Visa V dropped 6.2%, Discover DFS 5.3%, MasterCard MA 3.8%, and American Express AXP 3.4%, after the Senate approved restrictions on debit card fees