Stocks pared gains in the final hour of trading Monday after an early afternoon downgrade of Greece’s credit rating to “junk” status by Moody’s reignited concerns about European finances. A thin trading volume added to volatility.
Stocks began the session on a positive note after a report showed a surprise jump in industrial production in April in the 16 European countries that share the euro. The data bolstered hopes for the global economic recovery and sent the euro above $1.22.
Regional Fed President Bullard also added to bullish sentiments, noting Europe’s problems will not sour the US’ economic recovery and the global recovery will continue, with Asia leading from the front. However, the indexes reversed course in the early afternoon after Moody’s downgraded Greece’s debt rating by four notches to “junk” category.
Chinese activity in Greece and a $33 billion loan program from the Bank of Japan have bolstered this morning’s sentiment suggesting Wall Street would open with modest gains. Ahead of the opening bell, Dow Jones industrial average futures rose 49 points, or 0.5%, to 10,190. Standard & Poor’s 500 index futures rose 5.60 points, or 0.5%, to 1,091.80, while Nasdaq 100 index futures rose 11.25 points, or 0.6%, to 1,857.75.
On Monday, the Dow Jones industrial average dropped 20 points, or 0.2%, to 10,190.89. The broader S&P 500 index slipped 1.97 points, or 0.2%, to 1,089.63, while the Nasdaq composite index ended the day virtually unchanged. On the New York Stock Exchange, advancing shares stayed ahead of decliners by a three-to-two margin on volume of 1.14 billion shares.
However, a drop in equities did not benefit safe-havens. Prices of the 10-year notes dropped 8/32 as its corresponding yield, which moves inversely to prices, climbed to 3.262%. The CBOE Vix “fear factor” index eased 0.7% to 28.58. Gold prices retreated $5.70 to $1,224.50. The US dollar gained 0.2% to 86.66 against a basket of foreign currencies. A strengthening dollar sent dollar-denominated resource shares lower, and basic material stocks fell 0.7%. BP’s (NYSE:BP) shares continued to be under the hammer, dropping 9.7% on concerns about the company’s dividend and rising cost of the oil spill.
Uncertainty about the financial reform bill weighed on stocks from the sector, sending JP Morgan (NYSE:JPM) off 2% and Bank of America (NYSE:BAC) down 1.2%. Among S&P500 sector shares, financials dropped 0.6%.
Oil and gas sector shares dropped 0.5% by day’s end, even as the price of crude advanced $1.34 to $75.12. Intel (NASDAQ:INTC) and United Technologies (NYSE:UTX) managed gains, with Intel, up 1.2%, and United Tech up 1%.
