Investors remained jittery ahead of the confidence vote in Greece and an encouraging domestic jobs report failed to avert markets’ fall on Friday. A call for a referendum on the European deal by the Greek Prime Minister and the backtrack that followed led to a political crisis in the nation resulting in a volatile week, which ended four consecutive weeks of gains for the markets.
The Dow Jones Industrial Average (DJIA) dropped 0.5% and ended the week at 11,983.24. The Standard & Poor 500 (S&P 500) finished the day at 1,253.23, dropping 0.6%. The tech-laden Nasdaq Composite Index shed 0.4% and settled the day at 2,686.15. The fear-gauge CBOE Volatility Index (VIX) moved down by more than a percent to 30.16. On the NYSE, Amex and Nasdaq, consolidated volumes remained low at 7 billion shares. On the NYSE, decliners moved past the advancers by a ratio of 1,810 to 1,181. Markets failed to hold on to weekly gains as volatility spurred by Greece led to the benchmarks’ fall for the first time in five weeks. The Dow, S&P 500 and Nasdaq dropped 2.0%, 2.5% and 1.9%, respectively, for the week.
Last week, fresh concerns had started to emerge from the European continent after George Papandreou called for a referendum on the European debt plan late on Monday pulling down the benchmarks. Such a move had the potential to jeopardize the entire global economy and experts believed that rejecting the bailout plan might lead to a “hard default” by Greece. Meanwhile, sources had told a media house that the European Union and International Monetary Fund will not be providing Greece with a EUR8 billion payment till the referendum takes place. However, later during the week, Greece reversed its call for a referendum on the European debt deal, bringing respite to nervous investors. Speaking to party lawmakers, finance minister Evangelos Venizelos then announced that the referendum would not be held. This was a welcome move for investors because a vote against the plan would have pushed Greece closer to a default.
As it stands now, investors await the outcome of a crucial confidence vote in Greece, on which rests largely the fate of the $130 billion bailout package. Investors remain uncertain about the outcome of the vote and remain doubtful about the implications of the outcome as the austerity plan might see a dead end if the vote goes against Papandreou. Whatever the case, investors hope for a quick fix and remain wary of a political turmoil which might lead to another financial crunch.
Meanwhile, financials suffered a battering and the Financial Select Sector SPDR (XLF) fund was down 1.4%. Stocks including Bank of America Corporation (NYSE:BAC), Deutsche Bank AG (NYSE:DB), The Goldman Sachs Group, Inc. (NYSE:GS), Credit Suisse Group (NYSE:CS) and Wells Fargo & Company (NYSE:WFC) plunged 6.1%, 5.1%, 2.5%, 3.2% and 1.6%, respectively.
Concerns from the European front overshadowed domestic data and benchmarks closed in the red. Strong nonfarm payroll data from the U.S. Bureau of Labor Statistics that reported an addition of 80, 000 jobs in October could not wash out the losses on Friday. Unemployment rate remained at 9.0% and hit a six-month low. According to the report: “Employment in the private sector rose, with modest job growth continuing in professional and businesses services, leisure and hospitality, health care, and mining. Government employment continued to trend down”. Additionally, the government upwardly revised job additions in August and September than what was earlier reported and said a total of 102,000 more jobs were added. However, the 80, 000 job additions came in lower than the consensus expectations of a figure of 95, 000.
Separately, Groupon, Inc. (NASDAQ:GRPN) marked its debut on the Street after jumping 30.6% from its initial offering of $20 per share.
