On Friday, the benchmarks ended in the negative zone on fears of a slowing global economic recovery and markets recorded their sixth-straight week of losses. Showing signs of weakness, the Dow dropped below the 12,000 level for the first time since mid-March, all 10 industry groups in the S&P 500 settled in the red and the Nasdaq lost out on its yearly gains.
As the markets closed on Friday, concerns were widespread as the benchmarks recorded their sixth week of losses for the first time since the fall of 2002. On Friday, the Dow Jones Industrial Average (DJIA) dropped 1.4% to settle at 11,951.91. The Standard & Poor 500 (S&P 500) also declined 1.4% to finish the day at 1,270.98. The Nasdaq Composite Index closed at 2,643.73 after dropping 1.5%. The fear-gauge CBOE Volatility Exchange (VIX) soared 6.1% to settle at 18.86. On the New York Stock Exchange (NYSE) for every stock that rose, there were four stocks that moved down. The consolidated volumes on NYSE were 3.9 billion shares. For the week, the Dow, S&P 500 and Nasdaq are down, 1.6%, 2.2% and 3.3%, respectively.
The individual benchmarks set new records, but none of them displayed a positive trend to lift investor sentiment. The Dow plunged below its psychological 12,000 level for the first time since mid-March. Moreover, only three among the thirty Dow components managed to climb higher. The three stocks that moved up were Bank of America Corporation (NYSE:BAC) (1.4%), JPMorgan Chase & Co. (NYSE:JPM) (0.2%) and AT&T, Inc. (NYSE:T) and they surged 1.4%, 0.2% and 0.03%, respectively.
The S&P 500 had its worst weekly run since August 2010 and none of its 10 industry groups managed to settle in positive territory. It has also been longest run of weekly losses for the indices since July 2008. The Nasdaq suffered its largest weekly decline since August last year and also registered yearly losses.
Though markets ended in the green on Thursday, the gains were insufficient to prevent the markets from recording their sixth consecutive week of losses. If this trend continues next week, the markets will be recording their seven-straight week of losses for the first time in 10 years. The last time the markets suffered in such a manner was in May 2001. We had reported last week that a few analysts believed the gains on Thursday to be short-lived. Additionally, experts opined that the gains on Thursday was a technical bounce back and expected the S&P 500 to trace back to its March low of 1,250. While the markets have been dampened by disappointing reports on job markets, housing sector and manufacturing output, on Friday, wide spread concerns about the receding global recovery dragged the indices lower.
Concerns over China’strade surplus growing at a slower rate affected the mood adversely. The General Customs Administration reported a trade surplus in May, but the rate of growth slowed and was significantly below economists’ expectations. Economists had expected a surplus of $19.8 billion, but the trade balance jumped to a surplus of only $13.05 billion. Imports grew 28.4% in May to $144.11 billion and exports rose 19.4% to $157.16 billion. Economists had expected imports to rise 22% and exports to increase by 20.4%. However, while export growth took a backseat against the 29.9% growth in April, import growth was up from 21.8% in April. China also registered its weakest sales figures to the US and the European Union since late 2009.
Meanwhile, on the New York Mercantile Exchange, crude for July delivery dropped $2.64 or 2.6% to $99.29 per barrel after reports of Saudi Arabia increasing oil production to 10 million barrels a day in July. The Energy Select Sector SPDR (XLE) dropped 1.9% and decliners in the sector included Chevron Corp. (NYSE:CVX), ConocoPhillips (NYSE:COP), Exxon Mobil Corporation (NYSE:XOM), BP plc (NYSE:BP), Transocean Ltd. (NYSE:RIG) and Schlumberger Limited (NYSE:SLB) and they shed 1.5%, 1.4%, 1.7%, 2.6%, 3.7% and 2.5%, respectively.
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