A late-session slide punctured gains recorded earlier in the session, as concerns about European finances and the Gulf oil spill resurfaced. Encouraging comments from the Fed Chairman Ben Bernanke had sent stocks higher in the early going, with the Dow average touching the psychologically important 10,000 mark briefly, but markets pulled back on speculation BP could be forced to seek bankruptcy protection. German Chancellor Angela Merkel’s remarks that time to withdraw stimulus has come added to investors’ unease.
BP’s (NYSE:BP) shares continued to fall, sinking to their 14-year lows, as attempts to cap the undersea leak failed to show desired results and as investors considered a report that said BP could soon be in bankruptcy court. Investors were concerned that the economic fallout from the oil spill could be severe, and shrugged off Bernanke’s assessment that the economic recovery was on a firm footing. BP’s shares closed down 15.8%. Some U.S. lawmakers called on the company to stop dividends and advertising and use the money for cleaning up its spill.
The Dow Jones industrial average, up about 125 points in the morning session, closed with a drop of 41 points or 0.4%. Exxon Mobil (NYSE:XOM) led with losses of about 2%. The Standard & Poor’s 500 index dropped 6.31 points, or 0.6%, to 1,055.69, while the Nasdaq composite index shed 11.72 points, or 0.5%, to 2,158.85. On the New York Stock Exchange, advancing shares beat those that fell in price by a three-to-two margin on volume of 1.7 billion shares.
Crude prices gained 3.3% to $74.38, while prices of copper, often seen as proxy for growth, retreated 2.85% to $282.15. Safe-haven investments were in demand, with the 10-year US Treasuries climbed 3/32 in price as its yield dropped to 3.178%. The US dollar gained 0.1% against a basket of currencies to 87.96. After touching a record high Tuesday, gold prices dropped $15.70 to $1,229.90 an ounce. It rose as high as $1,254.40 an ounce on Tuesday.
In-line with yesterday’s leaked reports, Chinese exports surged nearly 50%, with trade surplus jumping to $19.5 billion, versus April’s $1.9 billion. Estimates had called for a trade surplus of $8.2 billion. The 48.5% jump in exports nearly matched a 48.3% rise in imports, feeding speculations that calls to let its currency rise would again gain ground.
Today’s key item of interest could be interest rate decisions by the Bank of England and later by the ECB. Expectations are lending rates would be held at existing record-low levels, with the Bank of England at 0.5% and the ECB at 1%.
