(AXP) Stock Market News for August 26, 2011 – Market News

Tense investors chose to raise cash ahead of the Federal Chairman’s speech at Jackson Hole and subsequently dragged the benchmarks lower, negating the effect of Warren Buffet’s $5 billion investment in Bank of America. Additionally, the jobs market painted another gloomy picture of the economy as initial claims grew.

The benchmarks registered its first day of losses for the week and ended their three-day rally. The Dow Jones Industrial Average (DJIA) slid 1.5% to settle at 11,149.82. The blue-chip index had initially gained 85 in the first few minutes of trading, but lost all these gains thereafter. The Standard & Poor 500 (S&P 500) lost 1.6% to close at 1,159.27. The Nasdaq Composite Index plunged 1.9% and finished the day at 2,419.63. The fear-gauge CBOE Volatility Index (VIX) surged to hover near 40. On the New York Stock Exchange (NYSE), for every stock that gained, more than three stocks were on the declining side. Consolidated volumes on the NYSE were 5 billion, well above the average volume. Bank of America Corporation (NYSE:BAC) contributed substantively towards higher volumes and accounted for almost 900 million shares.

The high volumes that BofA accounted for was largely due to news that the Warren Buffet was to invest $5 billion in the financial company. BofA’s shares soared 9.4% to settle at $7.65 after it had touched an intra-day high of $8.80 per share. BofA is a heavily beaten-down stock and had lost heavily except for the last couple of days. Earlier, fears emerged that the bank needs to raise capital to cover mortgage losses, and the stock subsequently hit a 52-week low.

Other financial stocks also joined the party and Citigroup, Inc. (NYSE:C), Barclays PLC (NYSE:BCS), Morgan Stanley (NYSE:MS), Royal Bank of Scotland Group plc (NYSE:RBS) gained 4.9%, 2.3%, 2.7% and 2.1%, respectively. American Express Company (NYSE:AXP) moved up modestly, by 0.02% and was the only winner among the 30 Dow components except BofA. However, other financial stocks like JPMorgan Chase & Co. (NYSE:JPM), The Goldman Sachs Group, Inc. (NYSE:GS), Discover Financial Services (NYSE:DFS), Deutsche Bank AG (NYSE:DB), UBS AG (NYSE:UBS) and Capital One Financial Corp. (NYSE:COF) incurred losses when the broader markets dipped and these stocks moved lower by 0.3%, 0.4%, 1.7%, 1.7%, 2.3% and 0.9%, respectively.

However, news about Buffet’s investment failed to lift the broader sentiment as investors remained tense ahead of the significant Fed Chairman’s speech. Markets anxiously await the announcement of another asset purchase program when the Federal Reserve Chairman Ben Bernanke walks up to deliver his speech at the central bank’s annual conference in Jackson Hole, Wyoming.

The economy has been faltering for a prolonged period now, with no encouraging economic reports and uncertainty about the financial situation weighing heavily on the markets. Global conditions have combined with domestic recessionary fears to severely dampen investor sentiment. Investors are hopeful that the bond-buying plan will give a boost to the financial markets. It was August last year when Bernanke had actually laid the foundation for the $600 billion bond-buying plan known as the QE2. The second round of stimulus had provided sufficient stimulus to the markets until its scheduled end. However, a section of market watchers opined that Bernanke might not announce a third quantitative easing program and contrary to expectations of dramatic steps, the Fed Chairman may talk of sober economic measures.

Additionally, jobs data weighed on investor sentiment as the U.S. Department of Labor reported an upsurge in initial claims. For the week ending August 20, the report stated that unemployment claims jumped 5, 000 from previous week’s revised figures to 417,000. Consensus estimates for the current period had projected initial claims at 414, 000. Justifying the increase, the Labor Department reported: “As a result of a labor dispute between Communications Workers of America and Verizon Communications, at least 12,500 initial claims were filed in the week ending 8/13/2011 and at least 8,500 initial claims were filed in the week ending 8/20/2011”.

AMER EXPRESS CO (AXP): Free Stock Analysis Report

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

BARCLAY PLC-ADR (BCS): Free Stock Analysis Report

CITIGROUP INC (C): Free Stock Analysis Report

CAPITAL ONE FIN (COF): Free Stock Analysis Report

DEUTSCHE BK AG (DB): Free Stock Analysis Report

DISCOVER FIN SV (DFS): Free Stock Analysis Report

GOLDMAN SACHS (GS): Free Stock Analysis Report

JPMORGAN CHASE (JPM): Free Stock Analysis Report

MORGAN STANLEY (MS): Free Stock Analysis Report

ROYAL BK SC-ADR (RBS): Free Stock Analysis Report

UBS AG (UBS): Free Stock Analysis Report

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