Stock Market News for June 2, 2011 - Market News

Markets came to a halt after a positive run for four consecutive trading days as weak economic data and a downgrade of Greece’s credit rating dampened investor sentiment on the opening day of the month. Benchmarks also suffered their worst drop since August 11, 2010 amidst slowing job growth, declining manufacturing activity and incremental euro-zone debt worries. The markets had registered their fourth consecutive week of losses last week, the first time since February 2010, and it is likely that the losing streak might be heading into its fifth week.

The Dow Jones Industrial Average (DJIA) moved down 2.2% to close at 12,290.37. The Standard & Poor 500 (S&P 500) ended at 1,314.54, after losing 2.3%. The Nasdaq Composite Index plunged 2.3% to settle at 2,769.19. The fear-gauge CBOE Volatility Index (VIX) soared 18.5% to 18.30. On the New York Stock Exchange, the AMEX and Nasdaq, consolidated volumes were 8.36 billion shares, below last year’s daily average of 8.47 billion. On the NYSE, only one stock managed to climb up for five declining stocks.

This was the biggest decline since August 11, 2010 for the Dow and S&P 500. None of the Dow components managed to end in the green and all of the 10 sectors of the S&P 500 were down more than a percentage. It was also the worst first day of the month for the Nasdaq since October 2009.

Among the biggest decliners in the Dow, Boeing Co. (NYSE:BA), Caterpillar Inc. (NYSE:CAT), Cisco Systems, Inc. (NASDAQ:CSCO), Walt Disney Co. (NYSE:DIS), General Electric Co. (NYSE:GE), Intel Corporation (NASDAQ:INTC), 3M Co. (NYSE:MMM) and United Technologies Corp. (NYSE:UTX) dipped 3.4%, 4.3%, 2.5%, 3.0%, 2.6%, 2.3%, 3.1% and 4.0%, respectively.

The financial sector was one of the biggest decliners in the S&P 500 and the Financial Select Sector SPDR (XLF) fund dropped 3.4%. Among the decliners, JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corporation (NYSE:BAC), Citigroup, Inc. (NYSE:C), Wells Fargo & Company (NYSE:WFC), The Goldman Sachs Group, Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS) dropped 3.4%, 4.3%, 3.7%, 5.0%, 3.2% and 4.3%, respectively.

On the economic front, manufacturing activity declined sharply in May to its lowest reading in 12 months and was at its slowest pace since September 2009. According to the Institute for Supply Management, the manufacturing index plunged to 53.5% in May from 60.4% in April. This is also the first time in 2011 that the index has dropped down below 60%. The ISM reported: “Slower growth in new orders and production are the primary contributors to this month’s lower PMI reading”. New orders dropped to 51.0 in May from 61.7 in the prior month and were at its lowest level since June 2009.

Jobs data once again provided little relief to the economy as Automatic Data Processing (ADP) Employment Services reported slowing growth in U.S. private-sector payrolls in May, which was also at its lowest level since September last year. According to the report, private employers added just 38,000 jobs, significantly lower compared to the downwardly revised figure of 177,000 in April. Jobs additions were also far below the expected level of 175,000.

The Mortgage Bankers Association reported a drop in US home mortgage applications last week. The index that includes refinancing as well as home purchase demand plunged 4% last week. However, according to a report from the Commerce Department construction spending was up 0.4% in April. According to the U.S. Census Bureau of the Department of Commerce, “construction spending during April 2011 was estimated at a seasonally adjusted annual rate of $765.0 billion, 0.4 percent (±1.6%)* above the revised March estimate of $762.1 billion. The April figure is 9.3 percent (±1.6%) below the April 2010 estimate of $843.1 billion”.

Euro-zone debt worries once again dampened investor sentiment as credit rating agency Moody’s downgraded Greece’s rating by three notches to Caa1 from B1, and also warned of possibilities of a further downgrade. The rating agency said: “The first trigger for today’s downgrade is Moody’s view that Greece is increasingly likely to fail to stabilize its debt ratios within the timeframe set by previously announced fiscal consolidation plans”. Following the downgrade the Greek finance ministry criticized the move and said that the move “is influenced by intense rumor in the media and overlooks the Greek government’s pledges to achieve its fiscal targets for 2011 and to accelerate privatizations”. Meanwhile, George Papandreou, Greece’s Prime Minister, will be meeting a gathering of euro-zone finance ministers on Friday in Luxembourg to discuss ways to ink a new deal in a bid to escape the euro zone’s first sovereign default.

Stock Market News for June 2, 2011 – Market News

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