A dismal reading on economic growth in the third quarter and soaring borrowing costs in the Europe dragged the markets to their fifth straight decline, while hints that the central bank would chip in to aid the domestic economy failed to spur an uptick. Last week, the S&P 500 had slipped below the key-technical level of 1, 225 and also plummeted below the 1, 200-mark. Yesterday, the index registered its longest losing streak since August this year.
The Dow Jones Industrial Average (DJIA) dropped 0.5% to close the day at 11,493.72. The Standard & Poor 500 (S&P 500) shed 0.4% to settle at 1,188.04. The Nasdaq Composite Index slipped 0.07% and finished the day at 2,521.28. The fear-gauge CBOE Volatility Index (VIX) kept hovering near 32. With Thanksgiving coming up this week, the Street seems to be less busy and the consolidated volumes on the New York Stock Exchange, Amex and Nasdaq were 6.99 billion shares, lower than the current daily average of 8 billion shares. On the NYSE, declining stocks outpaced the advancers by 18 to 11.
The Dow has now declined on four out of the five past sessions, while the S&P 500 and the Nasdaq have moved lower on all of those five days. Over the same period, the Dow has lost 5% and the S&P 500 is down 5.5%. While, the S&P 500 recorded its longest losing streak since August, the Nasdaq posted its longest losing streak since July 2010.
With Thanksgiving Day around the corner, investors were unimpressed by indications that the Federal Reserve might step up measures for stimulating the economy. However, committee members might not be announcing anything instantly after the central government’s policy meeting, with the prevailing uncertain economic outlook. Fed minutes also suggested that the interest rate is expected to be kept at record lows until mid 2013 and Operation Twist will remain on track.
However, investors had larger concerns on their mind with Spanish 10-year bonds surging to 6.58%, a level considered highly unsustainable. Short-term borrowing costs hit 14-year highs and the euro-zone debt crisis seems to be getting tougher to resolve. Investors’ sentiment was rattled by this unsustainable level, which may force the country to seek financial support. With no catalysts strong enough to overcome the concerns in the markets, news that the International Monetary Fund (IMF) would providing short-term credit for the troubled European markets failed to provide any impetus to benchmarks.
In economic news, a report from the Commerce Department said that the US economy could only log an annual growth of 2% during the third quarter. The “second” estimate by the Bureau of Economic Analysis is lower than the initial estimate of a growth of 2.5% and also falls short of consensus expectations of an annual growth rate of 2.4%.
The financial sector was once again a laggard with the KBW Bank Index falling 1.3% and the Financial Select Sector SPDR (XLF) fund dropping 0.9%. Bellwethers including Bank of America Corporation (NYSE:BAC), Citigroup, Inc. (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM), The Goldman Sachs Group, Inc. (NYSE:GS) and Wells Fargo & Company (NYSE:WFC) declined 2.2%, 2.2%, 1.7%, 2.1% and 1.0%, respectively.
