Stocks tumble on renewed fears over European debt

Global markets also drop after Greece calls for a referendum on its bailout package. Gold and oil fall. Data on US manufacturing activity and construction spending fall short of expectations.

By TheStreet Staff Nov 1, 2011 7:36AM

TheStreetImage: Wall Street sign (© Corbis/SuperStock)By Melinda Peer, TheStreet

 

Updated at 1:01 p.m. ET

 

Stocks were trading near session lows Tuesday as European leaders scrambled to address fears of eurozone destabilization in the wake of Greece's surprise call for a referendum on its eurozone bailout package.

 

The Dow Jones Industrial Average ($INDU) was down 315.1 points, or 2.6%, at 11,639. The S&P 500 ($INX) was losing 37 points, or 2.9%, to 1,216, and the Nasdaq ($COMPX) was off by 84.8 points, or 3.1%, at 2,599.

 

Stocks fell Monday as investors took profits at the end of one of the strongest monthly performances for stocks in recent years. The Dow gained nearly 1,042 points in October, marking the largest point advance in its history. On a percentage basis, the average rose 9.5% -- its best monthly percentage performance since October 2002, according to Dow Jones Indexes.

 

Greek Prime Minister George Papandreou surprised global markets late Monday by calling for a referendum on Greece's newly announced bailout package, putting the country at risk for default if voters reject the plan.

 

French President Nicolas Sarkozy requested an emergency meeting with key ministers to discuss what ripples Papandreou’s move could have on the eurozone, according to a Wall Street Journal report. The referendum comes three days before the G-20 summit that France will host in Cannes.

 

”This is just a political move and political maneuvers are not likely to derail the implementation of the eurozone plan. Statements from France and Germany seem to suggest that they are determined to enact the plan reached at the Brussels summit,” said Peter Cardillo, chief market economist at Rockwell Global Capital.

 

”I believe we’ll get some tangible statements out of the G-20 that should help calm some of the market fears. I believe the referendum vote was just a scare tactic. Greece may have to retrack and there probably won’t ba a referendum vote,” Cardillo said, adding, “Investors should take this opportunity and buy the dips.”

 

Asian markets sold off on the renewed eurozone uncertainty. Japan's Nikkei finished 1.7% lower, and Hong Kong's Hang Seng dropped 2.5%. In Europe, London's FTSE fell 2.3% and Germany's DAX plunged 4.9%.

 

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The euro was falling 1.18% against the greenback, which was up 1.27% against a basket of currencies, according to the dollar index.

 

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The stronger greenback continued to dampen the appeal of dollar-priced assets. The December gold contract was losing $24.20 to trade at $1,701 an ounce. Crude oil for December delivery was trading $3.29 lower at $89.90 a barrel.

 

Tuesday's economic data failed to give markets any boost. Manufacturing activity unexpectedly fell in October to a reading of 50.8 from September's level of 51.6. Economists had expected the Institute for Supply Management's Purchasing Managers' Index to tick up to a reading of 52 in October.

 

The Department of Commerce said construction spending rose 0.2% in September, which was slightly lower than expected rise of 0.3%. In August, spending jumped 1.6%

 

The benchmark 10-year Treasury was last gaining 12/32, diluting the yield to 1.994%.

 

On Monday, trading firm MF Global (MF) became the biggest U.S. casualty from the European debt crisis when it filed for Chapter 11 bankruptcy protection after making bets on European sovereign bonds. The news has been pressuring the financial sector as investors question whether there will be fallout from the firm's collapse. According to The New York Times, MF Global is being investigated after federal regulators discovered that millions in customer funds have "gone missing" in recent days.

 

Financial stocks were exerting the most pressure on the market. On the Dow. JPMorgan Chase (JPM) and Bank of America (BAC) were the biggest laggards. The Financial Select Sector SPDR ETF (XLF) was off by 7.8%.

 

In the latest earnings news, Pfizer (PFE) reported better-than-expected earnings of 62 cents a share and raised its 2011 guidance. Shares were gaining 1% to $19.47.

 

Shares of Credit Suisse (CS) were falling 8.8% to $26.40 after the Swiss bank missed analysts' profit projections with third-quarter earnings of 683 million Swiss francs ($769 million). The company also announced it will reorganize its securities division and cut 1,500 more jobs. The reductions are in addition to the 2,000 job cuts Credit Suisse announced in July.

 

Sirius XM Radio (SIRI) saw its stock tumble 2.5% to $1.75 after the satellite radio company topped third-quarter profit expectations with earnings of 2 cents a share but missed revenue estimates with sales of $763 million.

 

Anadarko Petroleum (APC) missed Wall Street’s third-quarter profit projections by a penny with earnings of 66 cents a share. The stock was dropping 2% to $76.86.

 

Members of the Federal Open Market Committee gather for the first of a two-day policy-setting meeting that will end with a rate decision Wednesday afternoon.

 

The week also offers a look at labor market conditions, with a report on company job growth from Automatic Data Processing on Wednesday and the government's October employment report on Friday. Economists anticipate an increase of 95,000 nonfarm payrolls and an additional 120,000 private payrolls. The unemployment rate is expected to hold at 9.1%.

345Comments
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Considering that the world population has doubled in the last 40 years, the writing is on the wall that it can not go on forever, nor be the basis for long term prosperity.  
This is fantastic news when I was in junior high school they were afraid the world's population would double every twenty years. 

We have dodged a bullet for now. 
Nov 1, 2011 11:25AM
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News Flash. Sarkozy dumps his hot model wife, elopes with Merkel. Stocks up 10% on the German /French cooperation escalation,  But a week  later the dude came to his senses, there was an annulment and stocks tanked yet again
Nov 1, 2011 11:23AM
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Great now we have the anti-investoridiots filling up the investor boards.  Children please,you do your cause--whatever that actually is--more harm than good.

Attention will not be paid
Nov 1, 2011 11:23AM
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Strange

                 Was it not just last week that Data on US manufacturing activity and construction spending was up?   

 

There is an old saying something about     Fool me once shame on you.

                                                                             Fool me twice shame on me.

Nov 1, 2011 11:23AM
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One day everything is great and the next the world is crashing....
...and lately it is always because Greece is either being saved or falling apart.   How can anyone believe that markets are either "efficient or rational"?????
Nov 1, 2011 11:22AM
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i wouldn't be surprised if that $20 wasn't pretty close to real.  BUT many companies have a penny per pount attitude.  save a penny across a bunch of pounds and you find a dollar!   so that $20 per unit, with 10 million being made, is a serious pile of money that COULD end up in CEO bank accounts if simply used to keep usa jobs.....  hey - what do ya think is more important?  ceo bank accounts or usa employee bank accounts? 

 

"when you have all 4 feet in the food trough - you eat first"

 

So I read somewhere the other day that s been speculated that it would only cost Apple $20 more per "gadget" to build ALL of their products right here in the good ole US of A.  Assuming for a sec that that info is somehow accurate (I have no idea how one could prove / disprove this?), do you guys have any thoughts on what a radical move like that could have on their company future?  Good or bad??  What do you guys think???
Nov 1, 2011 11:21AM
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Their "zero or next to zero" population growth, has reduced their ability to support all of their give away programs.
There is a morsel of reality in the above statement. Zero population growth will be the mark of the successful country and/or world in the future; sustainability and growth are not good bedfellows. Considering that the world population has doubled in the last 40 years, the writing is on the wall that it can not go on forever, nor be the basis for long term prosperity. 

Nov 1, 2011 11:21AM
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I saw an interesting article yesterday on something called the P/E 10 Ratio. Basically it was a ten year average of the P/E ratios of the S&P 500 companies. According to the study the S&P is now 30% overvalued in relation to average historical P/E's and prices. Food for thought.
Nov 1, 2011 11:20AM
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You also need to remember that if washington is a toilet or comode ! ? then wall street is the sewer pipe that it connects to !
Nov 1, 2011 11:19AM
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I'm sorry but I do not want to compete on a global marketplace. The global "Middle Class" makes 2 dollars an hour. Is that what you want for yourselves and your children? Americans have always built products that Americans buy. So do we continue to buy cheap foreign products with a lagging economy, or support working Americans? It worked for Reagan in the 80's, why not now?
Nov 1, 2011 11:17AM
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Hey since this IS an investor board people should know that Sundance spas (Jacuzzi spas) has about another month to fully move their operation from formerly Chino, California to Tijuana, Mexico.  Over the past 2 years this is an exodus of about 4000 jobs.  Having worked there for a while a few years back I can only say hurray to the corporate CEO’s to gain their bonus package thru this jobs reduction program and expect to see a serious decline in product quality once fully moved to Mexico. 

Nov 1, 2011 11:14AM
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MAKE LOTS OF MONEY AND SELL, SELL, SELL! Money Open-mouthed

Nov 1, 2011 11:13AM
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One day everything is great and the next the world is crashing,  This is out of control!! Everytime someone in Europe sneezes the stock market sells off.  Whats it going to be tomorow?? This whole fiasco is nothing more than big money buying and selling, manipulating the prices. I beleive the entire wall street is guity of insider trading.

Nov 1, 2011 11:12AM
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To Trucker Mark....That was a great analogy. Totally awesome writing. Of course there are some republicans and rich folks who are saying..." That's surely not me you're talking about, and if not..Maybe they should become Democrats or at lease step up to the plate and join the protest and be counted as true Americans and cast away the shadow of doubt. Remember the ole" poet that made the rhyme? The revolution will not be televised, The revolution will be live. You will not be sitting home eating popcorn and drinking beer in front of your TV sets, the revolution will be at your door.
Nov 1, 2011 11:12AM
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I think the voters know republicans are the problem now and will pull the handle on the comode and flush the crap !
Nov 1, 2011 11:12AM
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OCCUPY WALL STREET SELL ALL STOCKS.   create a panic sell
Nov 1, 2011 11:11AM
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Just exactly where is it written that the next president must be a DemoPublican? By voting a party/administration​ out by voting the other party/administration​ in is basically choosing the lesser of two evils, which in reality is simply voting for more Evil.
 Free thinking voters are mostly gone; now it is just corporate slaves demonstrating how easily the modern 'free' American is brainwashed and manipulated. A 'party' vote is a corporate/media vote; the universal campaign slogan should read "Business as usual for 2012!"
Nov 1, 2011 11:11AM
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So I read somewhere the other day that s been speculated that it would only cost Apple $20 more per "gadget" to build ALL of their products right here in the good ole US of A.  Assuming for a sec that that info is somehow accurate (I have no idea how one could prove / disprove this?), do you guys have any thoughts on what a radical move like that could have on their company future?  Good or bad??  What do you guys think???

 

Would you become a fan of a company if they (or someone else) made a move like this?

Nov 1, 2011 11:10AM
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These fears weren't know at all last week when stocks rose? This is all a bunch of "The sky is falling" speculation with no actual financial changes. Just talking heads fanning the flames to justice their pay.  

 

Tomorrow's news today: European fears not as bad as thought- market up. 

Nov 1, 2011 11:09AM
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That's putting the horse before the Cart Cart , Your right they play You investors like a piano
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