Anxiety returns to haunt Wall Street
Anxiety returns to haunt Wall Street
By Alex Barker
Copyright The Financial Times Limited 2007
Published: March 1 2007 14:30 | Last updated: March 1 2007 14:30
Wall Street stocks plunged as the markets opened on Thursday before stabilising in high volume trading. Investor anxiety returned after the release of mixed economic data and weakness in global equity markets.
US Treasuries rallied – a sign that of money flowing from riskier to safer assets – as stocks slumped across all sectors. The falls erased gains from the previous day’s tentative recovery and extended losses for the year.
The Yen also strengthened, suggesting that people are reversing “carry trades” that involve buying a low yielding currency and investing the proceeds in higher yielding riskier assets such as emerging market debt. Traders are watching the yen closely as an indicator of risk aversion.
The S&P 500 futures was 0.9 per cent lower at 1,393.54. The Dow Jones Industrial Average fell 0.8 per cent to 12,166.81. After a long bull run, the S&P and Dow are down 1.4 and 2.1 per cent respectively on the year so far.
The Vix Index, a measure of market volatility nicknamed Wall Street’s fear guage, shot up more than 25 per cent in early trading to 19.04, its highest point since June 15. It eased back to 18.3 by mid-morning, up 18.7 per cent.
Sectors that are sensitive to changes in consumer spending fared particularly badly, along with financials, materials and technology stocks.
Shares in Alcoa, the aluminium group, were 2.5 per cent lower at $32.57.
Technology groups Cisco and IBM both fell1.9 per cent down to $25.44 and $91.15 respectively.
Countrywide fell 2.6 per cent to $37.32 on concerns about mortgage lending.
Defensive stocks that are less vulnerable to economic swings weathered the day’s falls, with Proter & Gamble flat at $63.46 and the tobacco group Altria down 0.1 per cent at $84.36.
Economic data released this morning were mixed. Losses pared in later trading after the release of better-than-expected data on factory activity in the country.
Personal income rose at the fastest rate for a year. The higher than expected rise was driven up by executive bonus packages and rising wages for government employees.
Investors were also surprised by a rise in jobless claims figures. Many economists expected the number of claims for unemployment benefits to fall.
Stocks in China fell once again while equity markets in Europe were largely on the defensive.
SunTrust said that it was restating its fourth quarter profits because of a commercial bad debt problem.
Although the restatement at the bank was relatively minor, it unsettled investors and revived the long-running concerns about the mortgage lending market.
The European Commission warned Microsoft that it could face further charges because of unfair pricing. Shares in the software giant fell 0.4 per cent to $28.05.
Shares in Motorola jumped 2.7 per cent to $19.07 after Carl Icahn, the billionaire activist investor, said that he would be increasing his holding in the group. Mr Icahn has already made plain that he wants a seat on the board to push for Motorola to raise its level of debt and return cash to shareholders.
By Alex Barker
Copyright The Financial Times Limited 2007
Published: March 1 2007 14:30 | Last updated: March 1 2007 14:30
Wall Street stocks plunged as the markets opened on Thursday before stabilising in high volume trading. Investor anxiety returned after the release of mixed economic data and weakness in global equity markets.
US Treasuries rallied – a sign that of money flowing from riskier to safer assets – as stocks slumped across all sectors. The falls erased gains from the previous day’s tentative recovery and extended losses for the year.
The Yen also strengthened, suggesting that people are reversing “carry trades” that involve buying a low yielding currency and investing the proceeds in higher yielding riskier assets such as emerging market debt. Traders are watching the yen closely as an indicator of risk aversion.
The S&P 500 futures was 0.9 per cent lower at 1,393.54. The Dow Jones Industrial Average fell 0.8 per cent to 12,166.81. After a long bull run, the S&P and Dow are down 1.4 and 2.1 per cent respectively on the year so far.
The Vix Index, a measure of market volatility nicknamed Wall Street’s fear guage, shot up more than 25 per cent in early trading to 19.04, its highest point since June 15. It eased back to 18.3 by mid-morning, up 18.7 per cent.
Sectors that are sensitive to changes in consumer spending fared particularly badly, along with financials, materials and technology stocks.
Shares in Alcoa, the aluminium group, were 2.5 per cent lower at $32.57.
Technology groups Cisco and IBM both fell1.9 per cent down to $25.44 and $91.15 respectively.
Countrywide fell 2.6 per cent to $37.32 on concerns about mortgage lending.
Defensive stocks that are less vulnerable to economic swings weathered the day’s falls, with Proter & Gamble flat at $63.46 and the tobacco group Altria down 0.1 per cent at $84.36.
Economic data released this morning were mixed. Losses pared in later trading after the release of better-than-expected data on factory activity in the country.
Personal income rose at the fastest rate for a year. The higher than expected rise was driven up by executive bonus packages and rising wages for government employees.
Investors were also surprised by a rise in jobless claims figures. Many economists expected the number of claims for unemployment benefits to fall.
Stocks in China fell once again while equity markets in Europe were largely on the defensive.
SunTrust said that it was restating its fourth quarter profits because of a commercial bad debt problem.
Although the restatement at the bank was relatively minor, it unsettled investors and revived the long-running concerns about the mortgage lending market.
The European Commission warned Microsoft that it could face further charges because of unfair pricing. Shares in the software giant fell 0.4 per cent to $28.05.
Shares in Motorola jumped 2.7 per cent to $19.07 after Carl Icahn, the billionaire activist investor, said that he would be increasing his holding in the group. Mr Icahn has already made plain that he wants a seat on the board to push for Motorola to raise its level of debt and return cash to shareholders.
posted by Carlos T Mock @ 8:33 AM
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