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Euro-zone concerns crept back to haunt the benchmarks down by over a percentage each, while S&P 500 is back into the negative territory for the year. The recent ‘Santa’ rally that was mostly spurred by a series of encouraging domestic economic data finally hit the roadblock, reminding investors of the concerns that are still an overhang.
The Dow Jones Industrial Average (DJIA) inched down 1.1% to settle at 12,151.41. The Standard & Poor 500 (S&P 500) was down 1.3% to close the day at 1,249.64. The Nasdaq Composite Index finished yesterday’s trading at 2,589.98, after dropping 1.3%. As investors grew wary about the financial concerns, the fear-gauge CBOE Volatility Index (VIX) jumped 7.4% to settle at 23.52. With the ongoing festive mood, the Street was obviously less busy in trading. On the New York Stock Exchange, Amex and Nasdaq, consolidated volumes were 4.31 billion shares, sharply lower than the year's daily average of around 7.9 billion shares. The decliners outnumbered the advancing stocks on the NYSE, as for every four stocks that declined, only one stock managed to move up.
Markets had been rallying higher, termed the ‘Santa’ rally, for the past few trading sessions since last week. The gains were mostly contributed by encouraging domestic data. Significantly, the jobs market, housing sector and the consumer confidence data came in strongly, and all of these reflect and play critical roles in the economy’s health. The jobs market showed significant strength, as data from U.S. Department of Labor provided investors with a welcome reprieve after initial claims dropped to a three and half year low. Housing starts and building permits hit new highs in almost two years. Moreover, investors received a boost after the Commerce Department reported that U.S. consumer confidence had increased to 64.5 in December from 55.2 in November.
Yes, the concerns had remained amidst these as there were a few deterrent economic data regarding housing sector. Nonetheless, the rally was strong and took the S&P 500 into the positive zone for the year. With last Friday’s gains, S&P 500 was up by 0.6% for the year. On Tuesday, the index could marginally extend gains as it was up 0.01% at the close of Tuesday’s trading session. However, with a steep decline of 1.3% yesterday, the index once again returned to the red zone and is down 0.6% for the year. S&P 500 joined Nasdaq, which is down 2.4% for the year so far. The Dow, however, is up 5% this year. With just a couple more trading sessions remaining for the year, it will be interesting to see where the benchmarks ultimately end up.
It was once again the European concerns that adversely affected the markets yesterday. For the last few sessions there were not much headlines from the cross-Atlantic region. However, as investors focused once again to the cross-Atlantic region, it was their apprehension and uncertainty about the lingering debt woes that took the sheen away from benchmarks yesterday. Moreover, as for the immediate term, the investors are worried about how well Italy’s auction of the 10-year bonds will go about on Thursday. The 10-year bond yields had threatened the investor sentiment with its levels rising beyond 7%, a level considered as highly unsustainable. With regard to the auction, and as the year nears its end, investors will surely await a headline that reads: ‘All is well that ends well’. However, for now they remained worried and benchmarks had to suffer the slump.
The financial sector has suffered doldrums through the year as debt woes and recessionary fears kept infecting the markets. Yesterday too, the financials could hardly manage a cheer and the Financial Select Sector SPDR (XLF) fund was down 1.6%. Bellwethers like The Goldman Sachs Group, Inc. (NYSE:GS), Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), Morgan Stanley (NYSE:MS) and Citigroup, Inc. (NYSE:C) dropped 1.9%, 3.6%, 1.2%, 2.6% and 2.9%, respectively.
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