(C) Stock Market News for September 26, 2011 – Market News

After four consecutive days of heavy sell-offs, markets edged up modestly on Friday, bringing to a close one of their worst weeks in almost three years. Mounting fear and anxiety over Europe’s debt crisis coupled with the Federal Reserve’s gloomy forecast about the US economy had driven the markets down throughout the week.

The Dow Jones Industrial Average (DJIA) was up 37.65 points to close at 10,771.48 while the Standard & Poor 500 (S&P 500) index gained 0.6% to finish at 1,136.40. The Nasdaq Composite Index gained 1.1% to close at 2,483.23. The fear-gauge CBOE Volatility Index (VIX) continued its uptrend into the fifth-straight day, increasing 0.6%. On the New York Stock Exchange (NYSE), for every two stocks that moved up, one stock was on the declining side. Consolidated volumes on the NYSE, Nasdaq and Amex was about 8.9 billion shares, higher than the daily average of 7.94 billion.

Friday’s gains were attributable to news of G-20 officials gearing up for an international response to the global economic problem. Optimism was built up in light of the discussions between the G-20, the International Monetary Fund, the European Central Bank and the European Union on ways and means to deal with the debt crisis. The G-20 has issued a statement after stock markets declined worldwide on Thursday. The group will aim to help stabilize financial markets by ensuring that banks have sufficient funds to deal with the current scenario. G-20 said that it would take all steps necessary to “preserve the stability of banking systems and financial markets as required”.

The day was favorable for the transportation sector with airline stocks experiencing their biggest one day gain in nearly two weeks. Shares of US Airways Group, Inc. (NYSE:LCC), Delta Air Lines Inc. (NYSE:DAL) and United Continental Holdings (NYSE:UAL) gained 7.0%, 7.8% and 6.3%, respectively, on Friday. The Dow Jones Transportation average halted its biggest five day decline in over a month on Friday.

Financial stocks snapped their four-day losing streak on Friday with a rebound in the banking sector led by Morgan Stanley. However, financials are 9.5% down for the week as a whole. Shares of Goldman Sachs Group, Inc. (NYSE:GS), Citigroup, Inc. (NYSE:C), Wells Fargo & Company (NYSE:WFC) and Morgan Stanley (NYSE:MS) surged 1.3%, 4.3%, 2.2% and 5.1% respectively.

Incremental recessionary fears gripped the markets throughout the week and crushed the benchmarks except on Friday. However, the gains made on Friday were not strong enough to negate the heavy losses markets suffered and the Dow had its worst week since October 2008, plunging by 6.4%. The S&P 500 index sank 6.6% for the week. The tech-heavy Nasdaq slid 5.6%.

Lingering global recessionary fears spooked investors and dampened the markets which witnessed heavy selling. Concerns from Europe and the domestic front combined to weigh down sentiment. On the European front, Greece has been in the news for a considerable period now due to its debt situation. 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, and will then review the country’s financial situation. If the Troika delays the bailout fund, the country might find itself in a serious cash crunch and might be unable to pay its debt. Italy has also been dominating such concerns to an extent, and many believe that it might become the latest entrant on the debt-default list.

On the domestic front, things did not look bright last week, even with the central bank announcing new monetary measures, being termed as ‘Operation Twist’. The Federal Reserve did meet market expectations by announcing a plan to swap the short-term debt in its portfolio with long-term Treasury bonds, mirroring similar measures in the 1960s. 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 through the week till Friday’s gains offered some resilience.

CITIGROUP INC (C): Free Stock Analysis Report

DELTA AIR LINES (DAL): Free Stock Analysis Report

GOLDMAN SACHS (GS): Free Stock Analysis Report

US AIRWAYS GRP (LCC): Free Stock Analysis Report

MORGAN STANLEY (MS): Free Stock Analysis Report

UNITED CONT HLD (UAL): Free Stock Analysis Report

WELLS FARGO-NEW (WFC): Free Stock Analysis Report

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