Thursday, May 20, 2010

Stocks Fall as Strains Accumulate! What does this mean?

Euro "collapsing" becoming "radioactive" China's growth slowing, the Commercial property fallout yet to fully realized. How many new developments like the W hotels and others are up for renegotiation? How much empty commercial real estate is out there? Whilst the bad news wont have a true devastating effect for everybody the news will make it sound dire. In "charting terms" following the Dow or similar this will result in the second leg of a W movement. A share price collapse followed by a share price increase in a short space of time.

Lets watch Aivars

Stocks Fall as Strains Accumulate


U.S. stocks tumbled, leaving key indexes on pace for their first corrections since rallying from March 2009 lows.

Industrial and materials stocks led the decline as worries mounted that Europe's debt woes, in addition to possible slowing growth in China, will sap global demand. The broad retreat in stocks mirrored selloffs in many markets around the world, from the Australian dollar to metals, as investors shed riskier assets in favor of safer bets such as U.S. Treasury debt.

Worry over Europe persisted as unions went on strike in Greece and investors remained concerned that trading regulations like those introduced this week in Germany could be adopted in other countries.

"Confidence and patience are beginning to wear thinner" as no new solution emerges to calm the euro zone's turmoil, said Tim Evnin, equity portfolio manager at Evercore Wealth Management.
[0520stock] Reuters

Trading Specialist Geoffrey Friedman works on the floor of the New York Stock Exchange, May 20.

"The global interdependence is terrific when everything's working," he said, "It works in both directions. We can't immediately disassociate ourself with parts of the world that are doing badly."

The Dow Jones Industrial Average was down 277 points, or 2.6%, to 10168, in recent trading. The Standard & Poor's 500-stock index fell 32 points, or 2.9%, to 1083. Earlier selling intensified after the measures broke below their 200-day moving averages, at 10258 and 1102, respectively. The S&P 500's slide through 1100 was a key psychological move that fueled more selling, traders noted.

The measure was also on pace to post a correction of 10% from its 2010 high last month, along with the Nasdaq Composite, which was recently down 73 points, or 3.2%, at 2225. If the S&P 500 remains below 1096 through the close, and the Nasdaq is still below 2278, the measures will be down more than 10% from their 52-week closing highs reached in late April.

Sectors with the greatest global exposure posted the biggest drops, led by the material and industrial sectors as investors worried that international demand might decline.

The Dow's leading decliners included Alcoa, which dropped 4.5%; Caterpillar, which fell 4%; and Boeing, which slid 4%. Financial stocks also weakened as new trading restrictions in Europe and the U.S. Senate's debate over financial legislation continued. Hartford Financial Services slid 6.1%, while American International Group fell 6% and Citigroup slid 4%.

Shortly before 12:30 p.m., 3.7 billion shares had traded hands in New York Stock Exchange Composite volume, with 98% of volume in a downward price direction.
WSJ Professional

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Reflecting the market's heightened unease, the CBOE Market Volatility Index jumped to its highest point since April 2009, posting an intraday high above 45 before pulling back slightly.

New data added to the worries about the economy. The Labor Department said that initial claims for jobless benefits rose by 25,000 to 471,000 in the week ended May 15. Economists had predicted claims would fall by 4,000. In addition, the Conference Board's index of leading economic indicators fell in April for the first time since March 2009.

"Today's jobless claim report is evidence that there's not a strong, discernible trend that employment is stable and increasing," Mr. Evnin said.
Journal Community

The euro edged down to $1.2368 on Thursday, surrendering gains made a day earlier after comments from a euro-zone official suggested coordinated central-bank intervention to stem the euro's slide was off the table.

The euro was also weighed down by uncertainty over whether other euro-zone countries would follow Germany's ban on naked short sales of certain investments. Markets are also awaiting a crucial vote Friday in the German parliament over its contribution to the European Union/International Monetary Fund rescue package.

The U.S. Dollar Index, reflecting the U.S. currency against a basket of six others, edged up 0.1%. Treasurys also advanced, pushing the yield on the 10-year note down to 3.25%. Crude-oil futures fell to nearly $70 a barrel, as did gold futures.

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