Bloody Week on Wall Street Ends in Stalemate
FOX Business: The Power to Prosper
Capping off one of Wall Streets scariest weeks in recent memory, U.S. markets closed Fridays turbulent session in a deadlock as hopes for an ECB rescue boosted the blue chips, but the Nasdaq Composite extended its plunge amid continued economic fears.
Today's Markets
The Dow Jones Industrial Average jumped 60.93 points, or 0.54%, to 11444.61, the Standard & Poors 500 slipped 0.69 points, or 0.06%, to 1199.38 and the Nasdaq Composite slumped 23.98 points, or 0.94%, to 2532.41. The FOX50 gained 1.37 points, or 0.16%, to 864.92.
Underscoring the continued uncertainty gripping the financial markets, U.S. stocks swung wildly throughout the day and failed to post a sustainable rebound from Thursday's frightening 500-point plunge on the Dow. The sloppy trading day saw the blue chips open more than 150 points higher, but then quickly plunge more than 200 points into the red before storming back again.
The violent swings were driven by conflicting reports that the European Central Bank may begin buying Italian and Spanish bonds in an effort to prevent the continent's debt crisis from spreading and new data revealing the U.S. added more jobs in July than analysts had projected.
The equity markets are still very, very fragile. The huge move down yesterday is only going to reinforce that this is a very nervous environment, said Michael James, managing director of equity trading at Wedbush Securities. The only thing I can guarantee is the market is going to be very volatile because its going to be subject to the whims of sentiment.
By the closing bell, the blue chips had managed just a mini bounce back from Thursday's plunge, which sent the benchmark index plummeting 513 points, or 4.31% -- its steepest selloff since February 2009. That selloff left the blue chips in the red on the year, at their lowest levels since December 2010 and down 10% from recent highs -- correction territory.
"Attempts at a rebound failed miserably. We are witnessing not only flight from risk, we are witnessing a flight from everything," Peter Kenny, managing director at Knight Capital Group, wrote in a note.
For the week, the Dow plunged 698.63 points, or 5.75% -- the largest weekly decline since October 2008 during the darkest days of the financial crisis. The Nasdaq Composite suffered even deeper losses, plummeting 8.13% to levels unseen since November 2010.
The recent retreat on Wall Street has been sparked by a lack of confidence in Washington, worries about Europe's debt mess spreading to larger economies and a flurry of economic indicators signaling the U.S. recovery is on the verge of stalling or even going in reverse.
Worries about a double-dip recession have sent cash fleeing from risky assets like stocks and bonds and flooding into safe havens like dollars and Treasurys.
Trading volume was ferocious on Friday, with composite volume on the New York Stock Exchange blowing past 8 billion shares for the first time since May 2010.
Things could have gotten ugly again if it weren't for a Reuters report that the ECB is ready to buy Italian and Spanish bonds if the countries accelerate their economic reforms.
While The Wall Street Journal reported the ECB has not yet committed to such a move, traders bet that bond buying by the ECB could ease pressure on the euro zone that threatens to engulf the continent's bigger economies. Underscoring the enthusiasm for the ECB news, the euro surged more than 1.2% against the U.S. dollar. The heat is on the ECB to act after the Italian FTSE plummeted 13.1% this week to its lowest level since April 2009.
Jobs Report Rally Quickly Fizzles
Wall Street initially rallied after the government said the U.S. added 117,000 jobs last month, compared with forecasts for a rise of 85,000 and fears of a contraction. The unemployment rate unexpectedly declined to 9.1% from 9.2% and private employers added a robust 154,000 jobs. In another positive, the government also upwardly revised its June payroll figure.
While many are breathing a sigh of relief that payrolls expanded last month, the rise still represents tepid growth at this point in the economic cycle and is not really enough to significantly lower the unemployment rate. Still, some had feared payrolls would actually contract last month given the bleak data released in recent weeks.
"It is a sorry state of affairs when 117,000 total jobs created in any given month is cheered enthusiastically by markets," Dan Greenhaus, chief global strategist at BTIG, wrote in a note before U.S. markets opened. "How the mighty have fallen."
Some believed a significantly worse-than-expected payrolls figure would have actually spark buying because it would have forced the Federal Reserve to launch a third round of quantitative easing, already dubbed "QE3." The previous two bond-buying exercises proved to be a huge boost to equities.
Like equities, crude oil was volatile on Friday, but it managed to eke out a gain and end its five-day tumble. Crude settled at $86.88 a barrel, up 25 cents, or 0.29%. Still, the commodity plunged 9.22% on the week, its weakest performance since early May.
Debt Woes in Focus
U.S. stocks took a hit earlier in the day after the Journal reported that Italy's largest banks aren't experiencing liquidity problems and are able to access short-term financing. The comments seemed to bring back worries about Europe's debt crisis spreading to larger economies like Italy and Spain.
At the same time, rumors swirled around trading desks that Barclays is predicting S&P will downgrade the U.S. credit rating after the closing bell. However, Barclays told FOX Business it did not make any such statement and it is not making any predictions. While Fitch and Moodys have said they are evaluating the U.S. debt ceiling deal, S&P has been silent to this point.
Wall Street woke up Friday to a sea of red in financial markets around the world, highlighted by a 4.3% plunge in Hong Kong's Hang Seng. That selling appeared to mostly be in response to the scary plunge in the U.S. on Thursday. Global selling has been so dramatic this week that more than $2.5 trillion has been wiped off of world stocks, nearly matching the size of the French economy, Reuters reported.
Some believe the selling on Wall Street in recent days has been overdone. After all, the Dow lost more than 1,100 points in just 10 days and the market cap of the index crumbled by $150.4 billion on Thursday alone.
Corporate Movers
Procter & Gamble (NYSE:PG) beat the Street with a 15% rise in fiscal fourth-quarter profits to 84 cents a share. The consumer products giants revenue of $20.86 billion also topped estimates, but its earnings guidance disappointed.
Viacom (NYSE:VIA) revealed a stronger-than-expected 37% jump in third-quarter profits. The parent of MTV and Comedy Central posted non-GAAP EPS of 99 cents on $3.77 billion in revenue, compared with estimates for 86 cents on $3.52 billion.
Global Markets
The British FTSE 100 2.71 % to 5,246.99, the French CAC 40 dipped 1.26% to 3278.56 and the German DAX fell 2.78% to 6,236.16.
In Asia, the Japanese Nikkei 225 tumbled 3.72% to 9,299.88 and Hong Kong's Hang Seng plunged 4.29% to 20946.10.