Markets edged lower once again, bogged down by cross-Atlantic concerns as several euro-zone countries looked likely to suffer credit-rating downgrades. Things were also farm from cheerful on the domestic front after banking major J.P. Morgan Chase dampened sentiment with its quarterly results. These concerns mingled to partially erode weekly gains, but benchmarks were eventually able to hold on to gains for the week.
The Dow Jones Industrial Average (DJI) shed 0.4% to end the day at 12,422.06. The Standard & Poor 500 (S&P 500) was down 0.5% and closed Friday’s trading session at 1,289.09. The Nasdaq Composite Index slipped 0.5% and finished at 2,710.67. The fear-gauge CBOE Volatility Index (VIX) moved up by 2.2% and settled at 20.91. Nonetheless, the fear-gauge index is still well below the key level of 30. Consolidated volumes on the New York Stock Exchange, NYSE Amex and Nasdaq were 6.39 billion shares, lower than the daily average of 6.68 billion. The advancers were outnumbered by the decliners on the NYSE, as for 34% of the gainers, 63% of the stocks moved down. The remaining stocks were left unchanged.
For a long period now, the Euro-zone crisis have dented and occasionally added to the gains of the US benchmarks. Last week also, the markets’ movement largely depended on what happened on the other side of the pool and how domestic earnings reports turned out. As for the European factors, while reports of Germany’s economy contracting during the end of 2011 and a downward revision of economic growth estimates by the European Union (EU) dented the markets, on the other hand, a strong bond auction of Italy and Spain’s debt helped the markets move higher. An upbeat outlook from aluminum manufacturer and bellwether Alcoa Inc. (NYSE:AA) had also helped the markets’ uptrend. Thus, the week ended on a winning note and the Dow, S&P 500 and the Nasdaq gained 0.5%, 0.9% and 1.4%, respectively, for the week.
Also early-last week, investors received a boost after ratings agency Fitch Ratings affirmed that it will not lower France’s ‘AAA” credit rating. However, by the close of the week, the tables seemed to have turned following talk of a credit-rating downgrade Standard & Poor’s of several euro-zone members spooked investors on Friday. France and Austria looked certain to face the heat and reportedly the finance minister of France confirmed that French might suffer a downgrade by a notch. Also, The Wall Street Journal reported that an announcement of a credit-rating downgrade by S&P “could be imminent”, and the ratings agency was circulating a notice among the euro-zone members.
The talks had sent the markets lower and on the home front a dismal quarterly report from JP Morgan Chase & Co. (NYSE:JPM) added to the gloom. Adjusted earnings missed estimates and the banking bellwether also reported a drop in revenues. The dismal performance highlighted the threats the global economy is currently living with. Shares of JP Morgan Chase slid 2.5% and the financial sector as a whole suffered a slump. The Financial SPDR Select Sector Fund (XLF) fund dropped 0.8% and the KBW Bank Index (BKX) index was down 0.4%. Among the stocks, Bank of America Corporation (NYSE:BAC), Goldman Sachs Group, Inc. (NYSE:GS), Morgan Stanley (NYSE:MS), Citigroup, Inc. (NYSE:C) declined 2.7%, 2.2%, 3.2% and 2.7%, respectively.
As for the credit-rating downgrades, after the closing bell, S&P did ahead with the downgrades. The agency slashed France, Austria, Malta, Slovakia and Slovenia’s ratings by one notch. Meanwhile, Italy, Spain, Portugal and Cyprus were downgraded by two notches.
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