Investors sold off stocks Tuesday amid fresh concerns about Europe’s debt problems. Gold prices reached a new peak as investors shunned riskier bets and turned to safe-haven assets. Government bonds and the dollar also advanced.
After last week’s solid advance, U.S. equities appeared reluctant to add on to the gains and followed their European counterparts into the red as doubts about the European stress tests sent investors away from equities. The reports suggested some European banks would need to raise more capital to boost their balance sheets. All major indexes closed in the red, with the Dow average turning back into the red for the year. The doubts about the robustness of the European stress tests sent the blue-chip index down about 107 points.
The 30-share Dow Jones Industrial Average closed at 10340. The broader S&P 500 index and the tech-heavy Nasdaq Composite index also fell, with the S&P falling nearly 13 points, or about 1.1%, and the Nasdaq sliding 25 points, or 1.1%, at 2208.89. On the New York Stock Exchange, about three stocks fell for every one that advanced. Volume dropped to only 830 million shares on the NYSE. The CBOE Vix plunged 11.7% to 23.80. Crude prices fell 51 cents to $74.09, for their sharpest drop since August 31.
A report from the Association of German Banks stating Germany's ten largest banks may require about $134 billion in additional capital, as well as a German government release showing a surprise drop in July factory orders for the country also weighed on sentiments yesterday.
Only four of the thirty DJIA components showed gains on the session, with American Express AXP shares on top of the decliners’ list with a drop of 4.1%. Stocks registering declines of more than 2% were Disney DIS, off 2.4%, JP Morgan JPM, off 2.3%, Bank of America BAC, off 2.2%, and Cisco CSCO, off 2.2%. Leading on the upside were McDonald's MCD, up 1%, General Electric GE, up 0.3%, Coca-Cola KO, up 0.1% and Verizon VZ, up 0.1%.
All ten S&P500 industry sectors closed in the red, with financials leading with a 2.3% drop. Oil and gas (-1.6%), consumer services (-1.4%), industrials (-1.1%), tech (-0.9%), basic materials (-0.9%), utilities (-0.7%), consumer goods (-0.7%) health care (-0.7%) and telecommunications (-0.4%) all closed with losses.
Today’s Asian trade lacked vigour and indices fell across the region. In Tokyo, the Nikkei 225-stock average dropped 2.2% as the yen jumped to a fresh, 15-year high against the US dollar, sending Japanese exporters' shares lower. The Hang Seng index in Hong Kong dropped 1.46% to close at 21088.86. The Shanghai Composite index closed off 0.1%.
The US dollar jumped 1.1% against a basket of foreign currencies. Prices on US Treasuries also increased, with the 10-year up 10/32 in price as its yield dropped to 2.598%. An auction of $33 billion in 3-year notes sold at a record low yield of 0.79% Tuesday; today's schedule sees an auction of $21 billion 10-year notes.
AMER EXPRESS CO (AXP): Free Stock Analysis Report
BANK OF AMER CP (BAC): Free Stock Analysis Report
CISCO SYSTEMS (CSCO): Free Stock Analysis Report
DISNEY WALT (DIS): Free Stock Analysis Report
GENL ELECTRIC (GE): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
COCA COLA CO (KO): Free Stock Analysis Report
MCDONALDS CORP (MCD): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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