(AA) Stock Market News for September 23, 2011 – Market News

A heavy sell-off in the markets on Thursday triggered by policymakers’ failure to combat global recessionary fears battered the benchmarks to their heaviest single-day fall in five weeks. While the fear-gauge soared 12% and the sell-off entered into its fourth-straight day, the Dow had slumped by as much as 527 points at one point during the trading session.

The Dow Jones Industrial Average (DJIA) tumbled 3.5% to settle at 10,733.83. The Standard & Poor 500 (S&P 500) finished off at 1,129.58, plunging 3.2%. The Nasdaq Composite Index sank 3.3% and settled at 2,455.67. The fear-gauge CBOE Volatility Index recorded its biggest 2-day percentage jump on Thursday, moving up by 12%. On the New York Stock Exchange, for every 11 stocks that declined, only one stock moved up. The Street had a busy day with volumes recording the highest level since August 10. Consolidated volumes on the New York Stock Exchange, Amex and Nasdaq were recorded at13.24 billion shares, significantly higher than the daily average of 7.8 billion and the.

None of the 30 Dow components managed to finish in the green with Alcoa, Inc. (NYSE:AA), Bank of America Corporation (NYSE:BAC), Caterpillar Inc. (NYSE:CAT), EI DuPont de Nemours & Co. (NYSE:DD), Walt Disney Co. (NYSE:DIS), and United Technologies Corp. (NYSE:UTX) leading slide as they plunged 6.7%, 5.0%, 6.9%, 6.6%, 5.5% and 8.8%, respectively. The Dow had plunged by 527 points at one point and though it ultimately recovered from those levels, it could not avert its steepest drop since August 18. The blue-chip index is now just 14 points above this year’s lowest closing levels. Moreover, the index suffered its heaviest two-day percentage fall since December 1, 2008. Not only did the Dow suffer its steepest loss since August 18, the S&P 500 and Nasdaq followed a similar script.

Lingering global recessionary fears spooked investors and dampened the markets which witnessed heavy selling. Greece has been in the news for considerable period now due to its debt situation. Investors swung between pessimism and optimism over the Greece debt-crisis, with the latest development negatively impacting the markets. According to reports, the ‘Troika’, consisting of the European Union, European Central Bank and the International Monetary Fund will return to Athens only in October. Reportedly, the Troika will then review the financial situation in Greece. Meanwhile, Greece provided assurances that it was making every effort to further reduce its spending. The nation has to fulfill the Troika’s strict budgetary conditions in order to qualify for the bailout fund. If the Troika delays the bailout fund, which debt-ridden Greece is in dire need of, then the country might find itself in a serious cash crunch and might be unable to pay its debt.

The domestic situation seems equally grim. While it was widely expected that the Federal Reserve would come out with a new set of measures to boost the flagging economy at the end of the two-day Federal Open Market Committee meeting on Wednesday, the central bank actually provided more than what everyone expected. As expected, the central bank did meet expectations by announcing its plan to swap the short-term debt in its portfolio with long-term Treasury bonds, mirroring similar measures in the 1960s. ‘Operation Twist’ as it is being termed, aims to cut down on borrowing costs and will have the central bank purchasing $400 billion of Treasury bonds that range between 6 and 30 years and selling an equal amount of short-term maturities.

However, the Fed also stated: “Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets”. This observation seemed to suggest that another recession was in the offing and negatively impacted the markets, which continued even yesterday,. The economy has not yet been able to recover completely from 2008’s economic collapse and with domestic and global slowdowns looming large; investor fears of difficult times ahead seem justified.

As investor fears remained heightened, in-line data on initial claims could hardly affect the benchmarks. According to the U.S. Department of Labor: “In the week ending September 17, the advance figure for seasonally adjusted initial claims was 423,000, a decrease of 9,000 from the previous week’s revised figure of 432,000”. This report was in-line with the consensus projection.

ALCOA INC (AA): Free Stock Analysis Report

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

CATERPILLAR INC (CAT): Free Stock Analysis Report

DU PONT (EI) DE (DD): Free Stock Analysis Report

DISNEY WALT (DIS): Free Stock Analysis Report

UTD TECHS CORP (UTX): Free Stock Analysis Report

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