Markets ended nearly flat on Friday since investors were hoping that measures to fix the lingering debt crisis would be fast tracked. However, benchmarks suffered weekly losses, registering the worst weekly performance in two months.
The Dow Jones Industrial Average (DJIA) gained 0.2% to settle at 11,796.16. The Standard & Poor 500 (S&P 500) dropped 0.04% and closed the day at 1,215.65. The tech-laden Nasdaq Composite Index was down to 2,572.50, slipping 0.6%. The fear-gauge CBOE Volatility Index (VIX) moved lower to trade at 32. Consolidated volumes on the New York Stock Exchange, Amex and Nasdaq were roughly 6.7 billion shares, lower than the current daily average of 8 billion shares. For every 13 stocks that advanced, 10 stocks moved down on the NYSE.
While the markets ended flat, benchmarks suffered weekly losses and recorded their worst performance in two months. The Dow, S&P 500 and the Nasdaq dropped 2.9%, 3.8% and 4.0%, respectively, for the week. The S&P 500 had fallen below the key technical level of 1,225, on Thursday. The index had failed to break above the said level for two months starting August, until late October when it reached a two-month high. The drop below the technical level had intensified selling on Thursday leading to broad losses in the markets.
The week had been dominated by European concerns, where incremental borrowing costs of the nations unnerved investors and overshadowed positive developments in the domestic economy. Italy topped the 7% level for its 10-year bond yield, a level which is considered unsustainable. Similar incidents of increased bond yield had heightened fears in the past about debt-stricken countries like Greece, Ireland and Portugal, all of which ultimately required a bailout. Meanwhile, the 10-year bond yield for Spain had leapt to 6.3% and France also noted an upswing.
These fears overshadowed positive domestic data, including a drop in initial claims, improvement in the housing sector, better retail sales data, a drop in both the Consumer Price Index (CPI) and Producer Price Index (PPI), and an increase in domestic industrial production.
Also on Friday, a report from the Conference Board hinted at strong growth of the US economy in the upcoming months. According to The Conference Board economic activity increased at a better-than-expected pace since index of leading economic indicators was up 0.9% in October, ahead of consensus expectations of a growth of 0.5%. This was also ahead of the revised figures of a 0.1% uptick in September and the 0.3% rise in August.
Also on the domestic front, investors now keenly await the so-called Super Committee of congressional leaders to take measures and reach a deal on budget cuts and tax hikes that Congress can then approve. The November 23rd deadline is looming large for the deal, and a failure to close the deal on time will cause a cut worth $1.2 trillion from certain federally funded programs including Defense and Medicare.
On the European front, after a change in leadership in Italy and Greece, Spain awaits a vote over the weekend with the centre-right People’s Party expected to form the new government, replacing the ruling Socialist Party. While the Spaniards anticipate further austerity measures, Mariano Rajoy, expected to emerge as the nation’s new leader urged to work towards tackling the nation’s debt crisis.
On Friday, the financial sector was spared any further declines and managed to garner modest gains. The Financial Select Sector SPDR (XLF) fund was up 0.3% and stocks including Citigroup, Inc. (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS), UBS AG (NYSE:UBS) and Deutsche Bank AG (NYSE:DB) gained 1.1%, 0.4%, 0.6%, 2.6% and 1.5%, respectively.
Technology was one sector that suffered a decline on Friday and stocks like Apple Inc. (NASDAQ:AAPL), Google Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), International Business Machines Corp. (NYSE:IBM) and Oracle Corporation (NASDAQ:ORCL) dropped 0.7%, 1.0%, 0.9%, 0.3% and 0.7%, respectively.
