Wall Street falls in steadier trading
Wall Street falls in steadier trading
By Alex Barker
Copyright The Financial Times Limited 2007
Published: March 2 2007 13:44 | Last updated: March 2 2007 22:13
US stocks plunged in a torrid week, suffering their steepest one-day fall in equities since 2001. The slump reversed the year’s gains, and left open the question of whether worse was to come.
The turmoil, which included a sudden and spectacular fall on Tuesday afternoon that was partly attributed to a computer glitch, began a day after the announcement of the biggest proposed private equity deal in history.
There was little respite for investors on Friday, with the stock indices closing lower in somewhat calmer trading on Wall Street.
The S&P 500 Index was 1.1 per cent down at 1,387.16. It finished the week 4.4 per cent weaker. The Dow Jones Industrial Average fell 1 per cent to 12,114.10, down 4.2 per cent this week.
The technology-led Nasdaq Composite slid 1.5 per cent to 2,368 on Friday. After a steady bull run, the S&P and the Dow were down 2.2 per cent and 2.8 per cent respectively for the year so far.
By contrast, the S&P 400 index of medium-sized companies was still 2.4 per cent higher this year, buoyed by take-over deals.
Market watchers are still debating what was behind the rout. A slump on China’s stock markets was widely cited as the catalyst.
But strategists highlighted a plethora of other factors in explaining the flight from risky assets: worries about US mortgage lending and the housing market, mixed economic data and a stronger yen that put the global carry trade in doubt.
Even remarks on the economy from Alan Greenspan, the former Federal Reserve chairman, were blamed.
Ben Bernanke, the Federal Reserve chairman, temporarily calmed trading on Wednesday but the lull did not last, with the market reacting severely to any downbeat news.
“When Japan’s vice-finance minister made a comment that the carry trade was not a one-way street, the market reacted as if this was an ultimatum – it was panic,” said Marc Pado, chief market strategist at Cantor Fitzgerald, referring to the 200-point drop in the Dow on Thursday morning.
The Vix, the measure of volatility dubbed Wall Street’s “fear gauge”, shot up more than 60 per cent on Tuesday and 25 per cent on Thursday. It was set to end the week 76 per cent higher at 18.60.
In a mark of just how anxious investors became in February, the Vix experienced its biggest percentage rise that month since the collapse of Long Term Capital Management in 1998.
This week’s slump hit almost every sector. Companies that are more vulnerable to swings in the economy, the materials sector and homebuilders had some of the steepest declines.
The S&P Homebuilders Index was 5.1 per cent down this week after an unexpectedly sharp drop in new home sales put additional pressure on the sector. DR Horton fell 6.3 per cent to $25.31.
Fears of declining demand sent the S&P Materials Index 5.2 per cent lower, with aluminium group Alcoa 6.7 per cent down at $32.70.
Anxiety about the strength of financial markets hit the S&P Investment Banking and Brokerage sub-industry index, which plunged 8.6 per cent this week to its lowest level since November. Lehman Brothers stock dropped 8.8 per cent to $72.10 while Bear Stearns slid 8.6 per cent to $147.49.
New Century Financial and Accredited Home Lenders on Friday aggravated worries about subprime mortgage lending by asking permission to delay the release of their annual reports. Shares fell 7.6 and 3.7 per cent respectively to $14.65 and $21.70 on Friday.
Investors seeking protection from the rout sought out defensive stocks that are diversified and less sensitive to economic downturns. But even those stocks struggled in the broad sell-off. GE stock eased 0.6 per cent to $34.87. Shares in Procter & Gamble fared relatively well, down 2.6 per cent to $63.16.
The utilities sector was bolstered by the proposed $45bn takeover of TXU, the Texas utility, by Kohlberg Kravis Roberts and Texas Pacific Group.
TXU was one of just 20 companies in the S&P 500 Index that were set to finish the week higher, up 10.8 per cent at $66.50.
Merck and American International Group were the only two groups in the Dow that were up this week.
Shares in Merck rose 2.9 per cent to $44.19 on strong earnings. AIG, the insurer, unveiled an eightfold rise in profits. Its shares rose 3.2 per cent to $69.54 on Friday.
By Alex Barker
Copyright The Financial Times Limited 2007
Published: March 2 2007 13:44 | Last updated: March 2 2007 22:13
US stocks plunged in a torrid week, suffering their steepest one-day fall in equities since 2001. The slump reversed the year’s gains, and left open the question of whether worse was to come.
The turmoil, which included a sudden and spectacular fall on Tuesday afternoon that was partly attributed to a computer glitch, began a day after the announcement of the biggest proposed private equity deal in history.
There was little respite for investors on Friday, with the stock indices closing lower in somewhat calmer trading on Wall Street.
The S&P 500 Index was 1.1 per cent down at 1,387.16. It finished the week 4.4 per cent weaker. The Dow Jones Industrial Average fell 1 per cent to 12,114.10, down 4.2 per cent this week.
The technology-led Nasdaq Composite slid 1.5 per cent to 2,368 on Friday. After a steady bull run, the S&P and the Dow were down 2.2 per cent and 2.8 per cent respectively for the year so far.
By contrast, the S&P 400 index of medium-sized companies was still 2.4 per cent higher this year, buoyed by take-over deals.
Market watchers are still debating what was behind the rout. A slump on China’s stock markets was widely cited as the catalyst.
But strategists highlighted a plethora of other factors in explaining the flight from risky assets: worries about US mortgage lending and the housing market, mixed economic data and a stronger yen that put the global carry trade in doubt.
Even remarks on the economy from Alan Greenspan, the former Federal Reserve chairman, were blamed.
Ben Bernanke, the Federal Reserve chairman, temporarily calmed trading on Wednesday but the lull did not last, with the market reacting severely to any downbeat news.
“When Japan’s vice-finance minister made a comment that the carry trade was not a one-way street, the market reacted as if this was an ultimatum – it was panic,” said Marc Pado, chief market strategist at Cantor Fitzgerald, referring to the 200-point drop in the Dow on Thursday morning.
The Vix, the measure of volatility dubbed Wall Street’s “fear gauge”, shot up more than 60 per cent on Tuesday and 25 per cent on Thursday. It was set to end the week 76 per cent higher at 18.60.
In a mark of just how anxious investors became in February, the Vix experienced its biggest percentage rise that month since the collapse of Long Term Capital Management in 1998.
This week’s slump hit almost every sector. Companies that are more vulnerable to swings in the economy, the materials sector and homebuilders had some of the steepest declines.
The S&P Homebuilders Index was 5.1 per cent down this week after an unexpectedly sharp drop in new home sales put additional pressure on the sector. DR Horton fell 6.3 per cent to $25.31.
Fears of declining demand sent the S&P Materials Index 5.2 per cent lower, with aluminium group Alcoa 6.7 per cent down at $32.70.
Anxiety about the strength of financial markets hit the S&P Investment Banking and Brokerage sub-industry index, which plunged 8.6 per cent this week to its lowest level since November. Lehman Brothers stock dropped 8.8 per cent to $72.10 while Bear Stearns slid 8.6 per cent to $147.49.
New Century Financial and Accredited Home Lenders on Friday aggravated worries about subprime mortgage lending by asking permission to delay the release of their annual reports. Shares fell 7.6 and 3.7 per cent respectively to $14.65 and $21.70 on Friday.
Investors seeking protection from the rout sought out defensive stocks that are diversified and less sensitive to economic downturns. But even those stocks struggled in the broad sell-off. GE stock eased 0.6 per cent to $34.87. Shares in Procter & Gamble fared relatively well, down 2.6 per cent to $63.16.
The utilities sector was bolstered by the proposed $45bn takeover of TXU, the Texas utility, by Kohlberg Kravis Roberts and Texas Pacific Group.
TXU was one of just 20 companies in the S&P 500 Index that were set to finish the week higher, up 10.8 per cent at $66.50.
Merck and American International Group were the only two groups in the Dow that were up this week.
Shares in Merck rose 2.9 per cent to $44.19 on strong earnings. AIG, the insurer, unveiled an eightfold rise in profits. Its shares rose 3.2 per cent to $69.54 on Friday.
posted by Carlos T Mock @ 8:40 AM
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