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%.

 

Post continues below.

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
Nov 1, 2011 9:08AM
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Greece is the tip of the iceberg. This roller coaster ride will continue until the world gets right about finance.  Or clean slate happens and everyone gets there country back. Abolish the EURO, The FED, The IMF. Jobs and manufacturing will return with PROPER FAIR TARIFFS. In other words go back to a simpler time when each country handled there own affairs. Get the worlds governments out of the banking industry. Then REGULATE corporations away from politicians and government. Politicians are easily side lined with the promise of dollars. We can not afford the cost of corruption any longer.
Nov 1, 2011 10:45AM
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The GREATEST COUNTRY on earth yet we let the rest of the WORLD CONTROL US. DAMN!!!
Nov 1, 2011 7:53AM
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Well I'm not going to even read anymore about Greece....Just plain tired of it.

 

Time to cut them loose from the European Union....They are not a worthy Member.

 

Let them stand on their own or let them fail..They want to write their own destiny?..Let it be written...

 

They want to vote on their acceptance(bailouts)​ or austerity measures?...They better wake up....Coffee cup

Nov 1, 2011 8:11AM
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Eu debt deal is in actuality No Deal.  Just a sham to assist the gamblers on Wall Street in selling everyone else a beautiful story.

Not to worry as all Mother Goose stories end with, "and we all lived happily ever after."

As in the last days of Rome, the Romans were assured Rome was invincible, even as the conquerors were entering the gates of the city.

Nov 1, 2011 8:33AM
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It is almost amusing to watch the jump in U.S. government bonds. The flight to bonds has been the kneejerk reaction to turmoil for years. I don't see the logic in using any sovereign debt as a safe haven.

 

U.S.  government bonds are a safe haven because?????

 

1. they preserve your capital...No they pay less than the rate of inflation and will certainly reduce  your capital.

 

2. They have a perfect AAA rating...not any more.

 

3. They are intrinsically valuable...If you consider paper valuable, they can be converted only to other pieces of paper.

 

Heck I'm sold lets buy those treasury notes...and lets buy them from the country that is the biggest debtor in the history of the world. 

 

 

Nov 1, 2011 10:56AM
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Greece will default; it is just a matter of when.  In the meantime, the market is fluctuating not because of Greece worries, but by the large profit takers.  October was a great month overall: the best month in the history of the NYSE.  Because of that, large firms made millions if not billions and sold.  Any time that you have someone selling extremely large blocks of stock/bonds, the price goes down.  As the market began to go down, medium size investment firms began selling to stop the deterioation of the value of their investments.  Again, large blocks of stocks/bonds being sold.  The market continues to go down.  By now, some of the little guys climb on board and the situation gets worse.  The end of the day comes, and the market closes.  After hours, the big guys see real buy opportunities and begin doing so.  The market opens the next morning with futures being up.  The medium size guys see this and climb on the bandwagon.  The little guys see this and get in too.  However, the medium and little guys sold lower and buy back in higher.  Only the big guys really make money.  The media, being too stupid to realize this is what is really happening, create reasons for the changes: Greece is defaulting, the EU has a plan, there is peace in the Middle East, anything that indicates either something good or something bad is happening.  And people believe them because they are News people and they know what is going on.  A little advice here: believe only 25% of what you read because that is the only part that is the truth.  The rest is media hype and make believe to get you to believe what they want you to believe.
Nov 1, 2011 8:31AM
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The euphoria of last week is past.  Back to the old bait and switch routine.
Nov 1, 2011 9:42AM
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In the near  future the headline will read,

 

 

Holliday sales are to be adjusted down in anticipation of unexpectedly, expected weak sales due to disposable incomes used for the unexpectedly extended summer driving season's impact on prices at the pump.

 

I will expect the unexpected as it is expected?

 

 

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this could indeed unravel rapidly this week.  may God be with our global financial leaders and give them strength and guidance if this begins to spiral downward.
Our Global leaders G-20 are meeting in France to decide just how much more monies they are going to steal from us. 
Nov 1, 2011 9:39AM
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Coffee cup wow just enter.  spot on analysis of this entire situation.  bankers and one-percenters sucking the world financial system dry while building up their bond portfolios and enriching tiffany, coach, nordstrom, etc.  the giant vampire squid must die and the government be returned to a state of of the people, by the people and for the people.

 

really good analysis and post.  just as water seeks its own level, so will the poor and downtrodden.  the tsar got the message, as did antoinette and the aristocrats as did the caesars of the roman empire.  makes you wonder what it will take in the end to get some sensible, humane public policy from the wealthy rulers of our fair land. 

Nov 1, 2011 10:28AM
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Well put Brutus.  Sadly, "those" people are growing in numbers which is why this country continues on a downward spiral.  Weak-minded people continue to fall for these liars.  The weak-minded walk into the slaughter with a smile on their faces totally unaware of just what they did to this once great nation. 

 

As each day passes, I lose a little more hope that the US can ever recover.  No jobs.  No hope for jobs.  No common sense by many voters.  More and more just want handouts.  They are too selfish and dumb to think about where the handouts come from. 

Nov 1, 2011 10:22AM
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You got to be kidding me, Greece has to get citizen approval to pass a referendum?  You know as well as I do those people want everything handed to them on a silver platter and then some! Wow, that sort of sounds like some people in the U.S. who collect unemployment and welfare benefits!!!!!  Why all these countries have to bail out another countries debts is beyond me.  Let Greece Fall!!!  Why should every financial market suffer on something as stupid as that????

Nov 1, 2011 9:32AM
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Disappointed hmmm, a day late for Black Monday to arrive Vampire bat ???  greek "referendum" and the population says "screw the euro zone and the banks, we default 100%" ala argentina???  then the derivatives and insurance kicks in and we have another global credit crisis with european bank collapses, bailouts, TBTF's, and just who is backstopping the derivatives (surely not AIG) and how much is out there and just who is left holding the bag???  does this domino into italy, france, spain???  thence china??? thence goldman sachs, citi, boa, morgan, etc.???

 

this could indeed unravel rapidly this week.  may God be with our global financial leaders and give them strength and guidance if this begins to spiral downward.

 

good day for some people to be in URPIX or SPXU ....

Nov 1, 2011 10:14AM
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We need to pass Obama's job bill.  It will save the world.  Spending money we do not have has worked so well for the last 3 years.  Surely, spending more can only help.

 

And, as Biden has pointed out, it will also prevent all future rapes and murders.  Who is more insane/stupid?  Biden or Pelosi? 

 

 

Nov 1, 2011 10:22AM
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Who is more insane/stupid?  Biden or Pelosi?
I'd like to add option #3 - the people that voted for either of them.

Which makes the correct answer...... #4 - all of the above!
Nov 1, 2011 10:10AM
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Greece reminds me of a guy I knew who had a business that was going out of business. He had all kinds of advertisments saying slashing prices because he's going out business. This went on for over a year. This guy never went out of business and made a ton of money. Does everyone see where I'm going with this about Greece. Greece has been going out of business or failing for almost a year and their kicking. The moral of the story is if you get enough people believing that your going out of business and spending money you'll never have to go out of business. Greece is doing the same thing. The more countries give Greece money the longer Greece will exits, and the kicker is Greece doesn't have to pay the money back. This is better than a "Ponzi Scheme"
Nov 1, 2011 11:00AM
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Let's look at the real problem here, Greece, Italy, Spain and the rest of the "I like 30 days vacation a year" countries of the EU are what they are and have been since they adopted their socialist entitlement mentality, years ago. Their "zero or next to zero" population growth, has reduced their ability to support all of their give away programs.  Too many old people retiring at 50 with state provided pensions and not enough young people to support them.  None of this will change.  You have an entitlement mentality that, is in place and will be next to impossible to change. 

 

The real problem is right here at home. US Manufacturing and Construction Spending fall short of expectations.  The economic engine of this country is stalled, period.  Until the machines start running again, we will continue to muddle along at best.  The American worker is second to none.  We need to reduce legislation and allow our companies to compete fairly with China and the rest of the developing world.

 

 To all of you Obama supporter,  the mess we are in is not entirely his fault, however, he has made the situation worse by his lack of leadership, reckless spending and lack of experience with respect to basic economics. Great leaders are born, not made, period.  Mr. Obama is a great orator and would make a good salesman or charismatic preacher, but he is clearly, not capable of leading. Had the media done their job properly and not been so enamored with installing the first black President, perhaps we would be on the road to recovery, instead of the mess with which we are currently confronted.  I hope the voters of this country understand the precarious situation this country is faced with and vote for a complete change in 2012.

Nov 1, 2011 8:02AM
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The Greek problem is systemic all of the Band aids the the ECB and the IMF are using to treat the patient won't work. The debt problem will be coming to a nation near you since most governments have defaulted to the Keynesian model of how to deal with a downturn.

 

Currency wars and trade wars will be next on the agenda 

Nov 1, 2011 10:27AM
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OMG.. Obama has nothing to do with Greece or their problems... As for Wall Street, well they are always projecting and scaring themselves. A bunch of scared little brats that control money and get scared because they didn't take into consideration the current economy and then they cry when the money isn't being made for the corporate clients who invest? And this is how they live? Afraid because no one made enough profit? GREED....and it is killing us.
Nov 1, 2011 12:22PM
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Wow, and the lies...err.  NEWS last week if I remember was..'

 

"Markets SOAR on GREAT news out of GREECE about the debt crisis."

 

And it continues.   These liars... err Analysts tell us things are great so get back into the market to drive up the price so they can then dump their shares and cause the stock prices to tank, and make their millions.

 

But, oh yeah.. I forgot.  Wall Street has no power and the 99% don't know what they are talking about, and since I don't make 8 figures/year in bonuses and corporate welfare perks... I obviously don't know, either.

 

 

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