Stock Market News for February 5, 2010

An unexpected rise in jobless claims and lingering sovereign debt issues in Europe resulted in a massive selloff on Thursday, sending the blue-chip Dow average below the 10,000 mark for the first time since November.  Commodities plunged as jittery investors propelled the dollar to a more than seven-month high versus the euro, amid debt worries in Greece, Portugal and Spain. 

Many market participants feared this was the beginning of the much-feared correction and swooped up safe-havens, sending Treasuries up with the yield on the benchmark 10-year note down as much as 11 basis points to 3.59%.  The CBOE Vix, the market’s fear gauge, shot up 21% as nervousness increased and risk-aversion took precedence.  Oil prices declined to $73.14 a barrel and gold fell to a three-month low, settling at $1,062 an ounce.

After last November’s Dubai World jitters, rising sovereign debt concerns in Europe that started with Greece have kept markets across the globe on toes.  And after Japan’s credit outlook was downgraded and U.S. was warned of possible review of its triple-A rating by Moody's (NYSE:MCO), markets took the way south. Now Greece faces striking workers following news of its three-year plan to curtail its deficit; Portugal struggled with its treasury issuance; and Spain revealed a larger-than-expected budget deficit.

The broad-based decline sent all ten S&P500 industry sectors down by more than 2.4%, and on the NYSE, declining issues outpaced advancing shares by over ten to one.  Adding an exclamation point to the session's action, NYSE volume also picked up pace, rising to 1.481 billion shares.

The DJIA plunged 268 points, or 2.6%, to end the day at 10,002, a three-month low.  The tech-heavy NASDAQ shed 3% to finish at 2,125.  Weakness in natural resource and financial shares sent the S&P500 down 3.1% to a 1,063 close.

A rising dollar weakened dollar-denominated commodities.  Among the ten sectors of the S&P500, basic materials (-4.5%) and oil and gas (-4.0%) sectors led the pack of sector decliners.  Alcoa (NYSE:AA) off 4.3%, Freeport McMoRan (NYSE:FCX) dropped 5.3%, Rio Tinto (NYSE:RTP) plunged 6% and Newmont Mining (NYSE:NEM) declined 5.1%.

While yesterday's gains in same-store sales numbers for January were better than expected, investors instead chose to focus on recent weak employment numbers as they weigh on consumer sentiment.  Meanwhile, a bunch of retailers reported better-than-projected comps yesterday. Macy's (NYSE:M) sales posted a 3.4% gain, and the firm raised full-year growth targets. Gap (NYSE:GPS), American Eagle (NYSE:AEO) Aeropostale (NYSE:ARO) and Abercrombie and Fitch (NYSE:ANF) posted higher comparable sales growth.  American Eagle and Aeropostale raised their fourth-quarter outlook and Gap said it expected a 50% increase in profits from a year ago.

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Read the full analyst report on ARO

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