This page is temporarily not available. Please check later as it should be available shortly. If you have any questions, please email customer support at firstname.lastname@example.org or call 800-767-3771 ext. 9339.
Spain’ request for a bailout package sparked off fresh uncertainty, eventually dragging domestic markets down yesterday. Meanwhile, Moody’s cut the ratings of over a score of Spanish banks. Additionally, Cyprus also asked for a bailout and while investors remained jittery ahead of a European summit, Greece’s finance minister resigned.
The Dow Jones Industrial Average (DJI) slumped 1.1% to end a significant 138.12 points lower at 12,502.66. The Standard & Poor 500 (S&P 500) crashed 1.6% and finished yesterday’s trading session at 1,313.72. The tech-laden Nasdaq Composite Index moved down to 2,836.16, declining 56.26 points or 1.9%. The fear-gauge CBOE Volatility Index (VIX) jumped 12.5% to settle at 20.38. Composite volume on the New York Stock Exchange was 3.4 billion. The decliners far outnumbered the advancers on the NYSE; as for 75% stocks that declined, only 23% stocks could finish higher.
Once again, cross-Atlantic tensions dampened investor sentiment. Moreover, the concerns were many and varied and were spread across Spain, Greece and Cyprus, eventually making its rippling effect felt across the board. However, it was developments in Spain that played the biggest role in pulling down domestic markets yesterday. In a letter sent by Spain’s Finance Ministry to Eurogroup Chairman Jean-Claude Juncker, the troubled nation made a formal request for a bailout and Spanish Economy Minister Luis de Guindos said he would accept the European Union’s offer of providing a rescue package of up to $125 billion.
However, this development left many questions unanswered as Luis de Guindos never specified the amount that will be required to recapitalize the banks. The Economy Minister confirmed that he plans to sign the Memorandum of Understanding for the package by July 9, but apart from that there were not enough details available and investors were thus left in the dark. Guindos said the final amount will be decided on later and the conditions for the assistance were also not set.
While investors struggles to gathered details regarding Spain’s request, Moody's Investors Service further intensified concerns after it downgraded 28 Spanish banks. The ratings cut of these Spanish lenders follows Moody’s decision earlier this month to downgrade Spain from A3 to Baa3. Moody’s noted: "The reduced creditworthiness of the Spanish sovereign...affects the government's ability to support the banks".
As mentioned earlier, these concerns were not limited to the Spanish region with Cyprus joining the list of European nations seeking a bailout. In a statement the Cyprus government said: "The government of the Republic of Cyprus has today informed the appropriate European authorities of its decision to submit to euro area member states a request of financial assistance from the EFSF/ESM.” The statement also added: "The purpose of the required assistance is to contain the risks to the Cypriot economy, notably those arising from the negative spill-over effects through its financial sector, due to its large exposure in the Greek economy.” Cyprus is now the fifth nation among the 17-nation Euro block to seek a bailout, reflecting the region’s troubles economic situation.
Meanwhile, Greek Prime Minister Antonis Samaras will miss the EU summit owing to health concnerns. More importantly, just days after becoming the finance minister of Greece, Vassilis Rapanos resigned from his position, also on medical grounds.
Cross-Atlantic concerns dominated the mood yesterday since little was happening on the home front. The sole economic report was released by the U.S. Department of Housing and Urban Development, according to which sales of new single-family homes jumped to the highest in over two years. There was a 7.6% year-on-year jump in sales of new single-family houses in May 2012 and it stood at a seasonally adjusted annual rate of 369,000. This figure was also above consensus estimates of 346, 000.
However, this lone report failed to lift the sentiment and markets were on course for a decline. Among the sectors, Financial Select Sector SPDR (XLF) dropped 2.0% and stocks including Bank of America Corp (NYSE:BAC), Citigroup Inc. (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM), Goldman Sachs Group, Inc. (NYSE:GS), Morgan Stanley (NYSE:MS), Wells Fargo & Company (NYSE:WFC) and U.S. Bancorp (NYSE:USB) lost 4.3%, 4.4%, 1.9%, 2.6%, 4.7%, 1.8% and 1.8%, respectively.
Please login to Zacks.com or register to post a comment.