(BAC) Stock Market News for September 7, 2011 – Market News

European debt concerns sent stocks down for the third-straight day after investors returned from a long weekend. The benchmarks suffered their worst three-day start this month since October 2008. This was also the S&P 500’s worst start in September in five decades. However, an encouraging report on the services sector soothed nerves somewhat and partially eroded the losses.

As markets extended last week’s losses on Tuesday, the Dow Jones Industrial Average (DJIA) dropped 0.9% to settle at 11,139.30. The Standard & Poor 500 looks to be on course for its worst quarterly loss since the last quarter of 2008, and it shed 0.7% to close at 1,165.24 yesterday. The Nasdaq Composite Index logged a 0.3% loss to finish the day at 2,473.83. The fear-gauge CBOE Volatility Index (VIX) had its biggest gain in almost two weeks and gained 9.4% to settle at 37.08. On the New York Stock Exchange, the American Stock Exchange and Nasdaq, consolidated volumes were once again weak at 7.9 billion shares. On the NYSE, for three stocks that declined, only one managed to move higher.

Lingering concerns about the euro-zone debt crisis resurfaced to spook investors, while European shares dipped to their lowest finish in two years. Fears of the debt crisis spreading to Europe’s third largest economy, Italy, continued to gain strength, amidst debates in the nation’s parliament over austerity measures. Last month the European Central bank (ECB) had inflated its bond-buying program to include Spanish and Italian bonds, However, analysts opine that this would fail to suffice in the long run and believe that Europe might be heading into troubled times.

Euro-zone debt concerns have been a constant laggard for US benchmarks since late last year when Ireland was afflicted by the debt crisis. Spain, Portugal and Greece have been added to that list and Italy seems to be headed in the same direction. In July, the European Union had stepped in to announce a bailout package for Greece, but there seems to be no respite from lingering concerns. Global economic outlook had further weighed down investor sentiment and European markets had deteriorated also in August.

Concerns traveled across the Atlantic to dampen domestic sentiment, as US traded European banks felt the heat. Stocks like Credit Suisse Group (NYSE:CS), UBS AG (NYSE:UBS), Royal Bank of Scotland Group plc (NYSE:RBS) and Deutsche Bank AG (NYSE:DB) plunged 12.9%, 10.6%, 12.7% and 7.4%, respectively.

Banking stocks were further weighed down after The Federal Housing Finance Agency filed a lawsuit against Bank of America Corporation (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM) and The Goldman Sachs Group, Inc. (NYSE:GS) among other big lenders on Friday, accusing them of mortgage practices that resulted in losses for Fannie Mae and Freddie Mac. These stocks lost 3.6%, 3.4% and 2.3%, respectively. The list of 17 financial institutions that were served the lawsuit also included names of European banks. Apart from Credit Suisse and Deutsche Bank, banks like HSBC Holdings plc (NYSE:HBC), Barclays PLC (NYSE:BCS) and Société Générale also made it to the list. HSBC and Barclays lost 3.2% and 6.7%, respectively.

Meanwhile, investor apprehension over the possibility of another recession seems be gaining strength. These fears had eased somewhat earlier last week with economic reports providing some optimism. However, with the government’s non-farm payroll data on Friday showing zero jobs being added in August, hopes were dashed about a recovery of the faltering markets. The benchmarks were crushed by over 2% and it also eroded the week’s gains last week. In its report on Friday, the U.S. Bureau of Labor Statistics reported no new additions to nonfarm payroll employment, while expectations had earlier mounted for an addition of 75,000. The unemployment rate was also unchanged at 9.1%. Investors now await the outcome of the Federal policy meeting scheduled this month, and what President Barack Obama has to say on Thursday regarding the new jobs plan.

However, data from the Institute of Supply Management provided some relief to jittery investors as a report on the U.S. services sector snapped a three-month run of slow growth. The report stated: “The NMI registered 53.3 percent in August, 0.6 percentage point higher than the 52.7 percent registered in July, and indicating continued growth at a slightly faster rate in the non-manufacturing sector”. This reading is also contrary to economists’ projection of a drop to 51.

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