(AXP) Stock Market News for July 13, 2011 – Market News

Indices washed out early gains made after Fed minutes suggested the possibility of a third economic stimulus package, as euro-zone debt woes led to markets closing in the red for the third consecutive day. Meanwhile, reports of US trade deficit surging more than expected also kept investors jittery.

The Dow Jones Industrial Average (DJIA) shed 0.5% to settle at 12,446.88. The Standard & Poor 500 (S&P 500) finished at 1,313.64, after dropping 0.4%. The Nasdaq Composite Index declined 0.7% to close at 2,781.91. The fear-gauge CBOE Volatility Index (VIX) shot up to touch 19. Consolidated volumes on the New York Stock Exchange (NYSE), AMEX and Nasdaq remained low at 7.12 billions shares, compared with last year’s daily average of 8.47 billion. On the NYSE, for every 13 stocks that climbed up, 17 stocks traded lower.

A day after all the 30 Dow components traded in the red, only four stocks in the Dow managed to climb higher. American Express Company (NYSE:AXP), Cisco Systems, Inc. (NASDAQ:CSCO), The Travelers Companies, Inc. (NYSE:TRV) and Wal-Mart Stores Inc. (NYSE:WMT) were the four stocks that climbed up among the Dow components and they gained 0.3%, 1.1%, 0.1% and 0.1%, respectively. Bellwethers including Boeing Co. (NYSE:BA), Bank of America Corporation (NYSE:BAC), General Electric Co. (NYSE:GE) and Intel Corporation (NASDAQ:INTC) led the losses in the Dow as they plunged 1.9%, 1.4%, 1.3% and 1.8%, respectively.

While the indices were already reeling after disappointing jobs data that was released on Friday, investor sentiment was once again dampened after the Commerce Department reported a wider-than-expected trade deficit. The U.S. Census Bureau and the U.S. Bureau of Economic Analysis stated:” Total May exports of $174.9 billion and imports of $225.1 billion resulted in a goods and services deficit of $50.2 billion, up from $43.6 billion in April, revised”. This is the largest imbalance recorded since October 2008. Economists had estimated the trade deficit to be around $44.5 billion.

Pressure from disappointing economic data, which also spurred concerns about the sluggish economic recovery, was somewhat relieved after the Federal Open Market Committee’s released the minutes of its June 21-22 meeting. Some Fed members suggested the central bank should consider the possibility of a third round of quantitative easing. Such a step will become necessary “if economic growth remained too slow to meaningfully reduce the unemployment rate in the medium term”, according to some committee members. However other members were of the view that the central bank needed to tighten its policies if inflationary pressure refuse to subside. A difference in opinion about the next step will keep the markets choppy as some members contradicted this step.

Following this news, investors were faced with the disappointing trade deficit report and a downgrade of Ireland’s government bonds which combined to pull the markets into the red at the close. Moody’s Investors Service slashed Ireland’s foreign- and local-currency government bond ratings to non-investment grade of Ba1 from Baa3. Moody’s commented: “The main driver of today’s downgrade is the growing likelihood that participation of existing investors may be required as a pre-condition for any future rounds of official financing, should Ireland be unable to borrow at sustainable rates in the capital markets after the end of the current E.U./IMF support programme at year-end 2013”.

The euro-zone debt crisis has dented the markets time and again since late last year. Only recently, Portugal and Italy have joined the list and economists consider Italy’s debt woes to be of greater significance since it is the third-largest nation in the continent.

AMER EXPRESS CO (AXP): Free Stock Analysis Report

BOEING CO (BA): Free Stock Analysis Report

BANK OF AMER CP (BAC): Free Stock Analysis Report

CISCO SYSTEMS (CSCO): Free Stock Analysis Report

GENL ELECTRIC (GE): Free Stock Analysis Report

INTEL CORP (INTC): Free Stock Analysis Report

TRAVELERS COS (TRV): Free Stock Analysis Report

WAL-MART STORES (WMT): Free Stock Analysis Report

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