Market Wrap-Up
Stocks dropped hard Thursday as euro-zone worries were compounded by a looming vote on financial reform and news that the number of workers filing new claims for unemployment benefits surged unexpectedly last week.
The Dow Jones Industrial Average shed 376 points to close at 10068. The S&P 500 dropped 43 points to 1072 and stood down more than 10% from its apex this year, the common mark of a market correction. The Nasdaq gave up 94 points to end the day at 2204.
Financial sector stocks, including Goldman Sachs Group (GS), Citibank (C) and Bank of America (BAC) slid in afternoon trading after the Senate voted to stop debate on its version of the financial reform bill, bringing the measure closer to a vote.
European markets were down again at the close, spurring selling in the U.S. London’s FTSE was down 1.7%, Germany’s DAX dropped 2.0% and the CAC 40 in Paris was down 2.9%.
In a troubling sign for the U.S. job market, the Labor Department said in its weekly report Thursday that initial claims for jobless benefits rose by 25,000 to 471,000 in the week ended May 15. Economists surveyed by Dow Jones Newswires had predicted claims would fall by 4,000. The previous week’s level was revised upward as well, to 446,000 from 444,000.
The report added more fuel to investor concern about the global economy. Investors had already been fretting Thursday morning about the euro zone’s ability to contain Greece’s debt crisis. Markets are awaiting a crucial vote Friday in the German parliament over its contribution to the European Union/International Monetary Fund rescue package.
The euro rose to $1.2511 and the cost of insuring European corporate bonds against default rose sharply following comments by Jean-Claude Juncker, chairman of the Eurogroup forum of euro-zone finance ministers. He downplayed speculation that the authorities would intervene to arrest the euro’s decline, saying he does not believe there is any need for immediate action. Rumors of possible intervention had prompted the euro to bounce off four-year lows Wednesday.
The Dollar Index, reflecting the U.S. currency against a basket of six others, fell 0.67%. Treasurys also advanced, pushing the yield on the 10-year note down to 3.22%. Crude-oil futures fell, as did gold futures.
For a detailed rundown on Thursday’s trading session see our market story.
Winners
Another huge market swing pushed the S&P 500 VIX Short-Term Futures Index fund (VXX) up 14.1%. The iShares Barclays 20+ Year Treasury Bond fund (TLT) climbed 2.1% as investors sold off equities.
Losers
The ETFS Physical Palladium Shares fund (PALL) dropped 8.8% as investors backed away from precious metals. The resource-heavy Market Vectors Russia fund (RSX) shed 6.9%.
Thursday’s Industry Headlines
Launching Pad
State Street (STT) launched today the SPDR Barclays Capital International Corporate Bond fund (IBND) on the New York Stock Exchange. The fund seeks to track the performance of the Barclays Capital Global Aggregate ex-USD [greater than] $1 billion Aggregate Bond Index. The index includes euro-dollar and euro-yen corporate bonds and Canadian government, agency, and corporate securities that have a minimum of $1 billion market capitalization and at least one year remaining to maturity. Its annual expense ratio is 0.55%.
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