S&P 500 Has its Worst Week in 2 Years 08/01 16:17
U.S. stocks fell for a second day Friday, adding to the massive sell-off the
day before and giving the market its worst week in two years.
NEW YORK (AP) --- U.S. stocks fell for a second day Friday, adding to the
massive sell-off the day before and giving the market its worst week in two
Investors found little reason to move money into stocks, faced with the
growing geopolitical concerns in Israel and Ukraine, as well as banking
problems in Europe.
For the last two years investors have generally wanted to step in to buy any
major fall in the stock market, traders said, causing any sell-off to be met
the following day with modest buying. Traders said that the selling Friday, on
top of what happened the day before, is not a good sign.
"The follow-through from yesterday's (market drop) is very telling," said
Jonathan Corpina, a trader on the New York Stock Exchange with Meridian Equity
Partners. "The end of this week could not come at a better time as the weekend
might provide some stability."
On Friday the Standard & Poor's 500 index lost 5.52 points, or 0.3 percent,
to 1,925.15. The index fell 2.7 percent this week, its worst weekly performance
since June 2012.
The Dow Jones industrial average fell 69.93 points, or 0.4 percent, to
16,493.37. That's on top of the 317-point drop the index had on Thursday. The
Nasdaq composite fell 17.13 points, or 0.4 percent, to 4,352.64.
Energy and financial stocks were among the biggest decliners. Chevron, the
nation's second-largest oil and gas company behind Exxon Mobil, fell $1.34, or
1 percent, to $127.90. While Chevron's earnings were better than analysts had
predicted, the company's oil and gas production fell in the quarter. Exxon also
reported lower production when it released its own results Thursday.
Banking stocks also fell. JPMorgan Chase, Bank of America, Morgan Stanley
and Goldman Sachs all slid roughly 2 percent.
On Friday, the International Swaps and Derivatives Association ruled that
Argentina had officially defaulted on its bonds for the second time in 13
years, in what the ISDA calls a "credit event." In a "credit event," investors
who own credit-default swaps, a type of insurance that protects against a bond
issuer defaulting, are activated and the companies which wrote the policies
must pay the investors who own them.
In Portugal, the struggling bank Banco Espirito Santo plunged 40 percent.
Espirito Santo reported Wednesday a 3.5 billion euro net loss for the second
quarter, and there were concerns the bank is insolvent.
The concerns over the Argentinian default and as well as with European banks
were the biggest driver of Friday's market decline, said Jonathan Golub, chief
U.S. market strategist at RBC Capital Markets.
"The market doesn't like anything that could potentially disrupt the credit
markets," Golub said, noting that indicators of market volatility jumped on
Adding to the uncertainty, investors had the violence in Israel and Gaza as
well as Ukraine to worry about. A 72-hour ceasefire between Israel and Gaza
collapsed early Friday. In Ukraine, violence between government and pro-Russian
Ukraine's unrest as well as the concerns over Espirito Santo weighed heavily
on European markets. Germany's DAX fell 2.1 percent, France's CAC 40 fell 1
percent, and the FTSE 100 index fell 0.8 percent.
As global stock prices declined, traders moved money into investments
traditionally seen as having lower risk Friday, such as U.S. government bonds,
gold and utility stocks.
Investors did get some good news about the U.S. economy. The Labor
Department said that U.S. employers created 209,000 jobs in July, while the
unemployment rate rose to 6.2 percent from 6.1 percent. July was the
sixth-straight month that U.S. employers created more than 200,000 jobs, a sign
that the U.S. economy continues to recover. Economists also pointed out that
the rise in the unemployment rate was likely due to more out-of-work people
actively looking for jobs.
"In a nutshell, it's a good report," said Dan Greenhaus, chief strategist at
brokerage firm BTIG in New York. "Not too hot, not too cold."
The good news on the economy also means the Federal Reserve isn't going to
be there to hold investors' hands for much longer. The central bank said
Wednesday it would cut back its bond-buying program again, and investors now
believe the Fed is looking to raise interest rates starting next year.
The Fed's stimulus efforts, combined with the growing U.S. economy, have
helped pushed the stock market higher. The last time U.S. stocks had a
correction, meaning a decline of 10 percent or more in a benchmark index like
the S&P 500, is nearly three years ago. They typically happen every 18 months.
Proctor & Gamble was among the day's winners. The stock rose $2.33, or 3
percent, to $79.65. The consumer products giant said it earned an adjusted
profit of 95 cents a share, four cents better what analysts had expected. P&G
helped lift other consumer staples companies, making the industry the best
performing industry in the S&P 500.
In other trading, the yield on the 10-year Treasury note fell to 2.49
percent and the price of gold rose $12.30 to $1,293.60 an ounce. Silver fell
four cents to $20.37 an ounce.
The price of oil fell to the lowest level since Feb. 6. Benchmark U.S. crude
oil dropped 29 cents to $97.88 a barrel, and ended the week with a loss of
$4.21 a barrel, or 4 percent.