Stock Market News for May 23, 2011 - Market News

European debt concerns once again resurfaced to drag the markets lower on Friday. Disappointing earnings from retailers added to the bearish sentiment and washed out the gains of the previous two days. Following these developments, markets continued their run of weekly losses for the third-straight week.

The Dow Jones Industrial Average (DJIA) dropped 0.7% to settle at 12512.04. The Standard & Poor 500 (S&P 500) shed 0.8% to close at 1333.27. The Nasdaq Composite Index ended its three-day winning run to end at 2803.32, after losing 0.7%. On the New York Stock Exchange trading volumes remained low and composite volumes were a mere 3.7 billion shares. On the NYSE, for every couple of stocks that fell, one climbed up.

In the absence of positive economic data and with the earnings season nearing its close, markets are more likely to be affected by global events and investors are refraining from placing big bets. Such was the case on Friday, as a downgrade of Greece’s credit rating negatively affected the US indices and the absence of strong economic data failed to limit losses.

Ratings agency Fitch downgraded the credit rating of Greece by three notches to B+ from BB plus, citing incremental problems of the country to resolve the crisis in itspublic finances. Speculation and a difference of opinion among European policy makers about restructuring Greece’s sovereign debt were other reasons for the downgrade. Earlier in the week, European Union officials had suggested there were chances of a “soft restructuring” of Greek debt. The rating agency said: “An extension of the maturity of existing bonds would be considered by Fitch to be a default event and Greece and its obligations would be rated accordingly”. Fitch also cautioned: “In the absence of a fully funded and credible EU/IMF program, the rating would likely fall into the ‘CCC’ category indicating that a Greek sovereign debt default was highly likely”.

Meanwhile, it is feared that Spain is likely to add to euro-debt woes, as fresh concerns are likely to arise about the country’s debt situation after the completion of elections in the nation. Analysts opine that after the possible defeat of the Socialists, the Popular Party might focus even more on elevated debt levels than what was expected earlier. This will automatically add to lingering euro-debt worries and subsequently US markets are most likely to feel the burden.

Earnings results from retailers Gap Inc. (NYSE:GPS) and Aeropostale, Inc. (NYSE:ARO) also dragged the markets lower after they released their quarterly results. While Gap disappointed investors with a negative outlook that suggested higher cost of raw materials will pressurize profits, Aeropostale disappointed traders after reporting slowing growth in revenues and margins. Shares of Gap declined 17.5% to settle at $19.22 and Aeropostale closed down 14.3% to settle at 18.30.

However, the energy sector was led higher as crude oil for June delivery surged 1% to settle at $99.49 per barrel. Among the energy indexes, NYSE Arca Oil Index dropped 0.2% but the NYSE Arca Natural Gas Index and The Philadelphia Oil Service Index surged 1% and 0.2%, respectively. Shares of Anadarko Petroleum Corporation (NYSE:APC) were lifted 4.1% after BP plc (NYSE:BP) reached a legal settlement with Macondo well stakeholder Moex Offshore 2007 LLC. Anadarko owns 25% of stake in the Macondo well. Shares of BP jumped 2.5%.

The Financial sector edged lower and with The Goldman Sachs Group, Inc. (NYSE:GS) and U.S. Bancorp (NYSE:USB) shedding 3.1% and 2.4%, respectively. Among other decliners, Morgan Stanley (NYSE:MS), JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC), American Express Company (NYSE:AXP) and Citigroup, Inc. (NYSE:C) declined 1.9%, 2.0%, 2.1%, 1.2% and 0.9%, respectively.

Stock Market News for May 23, 2011 – Market News

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