Stocks drop as Europe euphoria fades
US and global markets slide on doubts over the EU rescue plan. Japan intervenes to curb the yen. MF Global files for bankruptcy. Gold and oil prices fall.
By Chao Deng, TheStreet
Updated at 1:19 p.m. ET
Stocks were down more than 1% Monday, following global markets lower and halting October's robust rally, as investors grew cautious about plans to expand Europe's emergency debt rescue fund and after the Japanese government intervened to cap a rising yen overnight.
At 1:19 p.m. ET, the Dow Jones Industrial Average ($INDU) was down 157 points, or 1.2%, at 12,074. The S&P 500 ($INX) was down 17 points, or 1.3%, at 1,268, and the Nasdaq ($COMPX) was losing 30 points, or 1.1%, at 2707.
"We've had a tremendous run the last couple of weeks so investors are getting a little vertigo and taking money off the table," said Paul Nolte, managing director at investment firm Dearborn Partners. With just one trading day left in October, the Dow has posted a 12% gain for the month.
The fate of trading firm MF Global (MF) cast a gray cloud over the banking sector in particular. JP Morgan Chase (JPM) and Deutsche Bank (DB)fell 3.4% and 9%, respectively. Financials on the S&P 500 were down 2.2%.
Investors were spooked by news that the securities firm filed for chapter 11 bankruptcy after making risky bets on European sovereign debt, according to a petition filed to the Federal Bankruptcy Court in New York.
According to its filing, MF listed as many as fifty thousand creditors, the largest being JPMorgan with $1.2 billion in exposure. While MF Global is not big enough to present a systemic risk to the financial system, it is considered the biggest U.S. casualty to date from the eurozone debt crisis.
While a plan from eurozone leaders last week to address the region's debt crisis was met with relief from investors, concern that Europe is far from resolving its debt crisis and economic malaise has led to some nervousness over whether stocks can extend a strong run into the next month. Economists say that Europe is headed for a prolonged period of slow growth.
In overnight trading, the Japanese government sold the yen to curb the rising value of the currency in an attempt keep the country's exports competitive. The dollar hit a three-month high against the yen, bouncing up from a postwar low of 75.31 yen. Japan's Nikkei finished 0.7% lower, and Hong Kong's Hang Seng lost 0.8%.
London's FTSE fell 1.5%, and Germany's DAX closed down by 2.3%.
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The U.S. dollar was strengthening against a basket of currencies, with the dollar index gaining 1.1% to $75.91, while the euro was falling 1% against the greenback.
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The rising dollar pressured commodities like gold, which was falling $24.50 to trade at $1,722.70 an ounce. The December crude oil contract was losing $1.16 to trade at $92.16 a barrel. The benchmark 10-year Treasury was last gaining 5/32, diluting the yield to 2.384%.
Markets await key announcements on monetary policy from the U.S. Federal Reserve and the European Central Bank as well as the U.S. government's October jobs report later in the week.
Ahead of a read on U.S. manufacturing activity Tuesday, a report showed activity in the Midwest region deteriorating slightly in October. The Chicago purchasing managers index dropped to 58.4, about in line with economists' expectations after the index came in at 60.4 in September.
Health insurer Humana (HUM) was rising after topping profit estimates by 51 cents a share for the third quarter.
Do you fancy working for a company that has a little more than 500 employees and has the following statistics?:
* 29 have been accused of spousal abuse
* 7 have been arrested for fraud
* 19 have been accused of writing bad checks
* 117 have directly or indirectly bankrupted at least 2 businesses
* 3 have done time for assault
* 71 cannot get a credit card due to bad credit
* 14 have been arrested on drug-related charges
* 8 have been arrested for shoplifting
* 21 are currently defendants in lawsuits
* 84 have been arrested for drunk driving in the last year ...
Can you guess which organization this is?
Given up yet?
It's the 535 members of the United States Congress. The same group that cranks out hundreds of new laws each year designed to keep the rest of us in line.
UBS lost $2 billion last quarter because of a rogue trader. In MF Global's case, the rogue trader just happened to be the CEO...and former Governor of New Jersey, and former CEO at Goldman-Sachs. Once a politician, always a politician - addicted to spending and wasting other people's money...
After returning from a 10-year hiatus from Wall Street, Jon Corzine stepped into the Chairman and CEO role at MF Global as the conquering hero, hellbent on creating a new Goldman-like trading giant.
The former New Jersey governor and ex-CEO of Goldman Sachs staged his triumphant return to the banking business 17 months ago with a plan to throw out the risk-averse plan set in place by former chief Bernard Dan and grow the business through leverage -- turning the midsize derivatives and commodities brokerage firm into an investment bank.
But instead of Goldman-like profits, MF is looking more like a Lehman Brothers or a Bear Stearns after the aggressive bets by Corzine -- including a whopping $6.3 billion exposure to European government debt -- have left the firm teetering on the brink.
Speculation ripped through Wall Street on Friday that MF Global might not last the weekend -- with either asset sales or, somewhat less likely, a bankruptcy filing by today, as the firm’s customers flee with their money after two big credit rating agencies downgraded its debt to “junk” status.
By the end of the week, MF was forced to draw down on its lines of credit to remain afloat. Its stock price tanked more than 70 percent during the week, sinking below a dollar. It ended regular trading on Friday at $1.20, down 16 percent, a far cry from the $9 it zoomed to when word hit in March 2010 of the arrival of the firm’s new star CEO.
The 64-year old Democrat was said to be scrambling to clinch some sort of deal with the bankers, including creditors Goldman and Citigroup. Corzine brought in Evercore Partners to help figure out the firm’s options.
MF’s trouble started when Corzine, who racked up $600 million for himself during his glory days at Goldman, where he rose from bond trader to co-CEO, went back to his old playbook and made aggressive trades with his new firm’s own capital in a bid to jack up its flagging profits.
Some market observers have pegged the firm’s leverage ratio at 40-to-1, a level that tops both Lehman Brothers and Bear Stearns before they collapsed.
Difference Between Republicans and Democrats
A Republican and a Democrat were walking down the street when they came to a homeless person. The Republican gave the homeless person his business card and told him to come to his business for a job. He then took twenty dollars out of his pocket and gave it to the homeless person.
The Democrat was very impressed, and when they came to another homeless person, he decided to help. He walked over to the homeless person and gave him directions to the welfare office. He then reached into the Republican's pocket and gave the homeless person fifty dollars.
Now you understand the difference between Republicans and Democrats
For years we accused Japan of devaluing the yen to make their exports more profitable and they have denied it. Now we have the proof and you hear nothing about it. Why do we give a crap about Japan and their economy we need to worry about OUR economy first. Japan only cares about their economy so lets return the favor.
Overheard last week:
Sarkozy, " I don't think China is going to bail us out."
Merkel, " I don't think the U.S. is going to bail us out either."
Sarkozy, "It's Wednesday and we have to tell them something."
Merkel, "Tell them what they want to hear. You know, the voluntary 50% haircut deal."
Sarkozy: "That won't solve the problem and everybody knows it."
Merkel, "This isn't about facts, it's about faith. The world's economy is at stake."
Sarkozy, "My credibility will be ruined forever if I lie and say we've got a fix."
Merkel, "What credibility? You're a Frenchman."
Sarkozy, "Women are more believable. Why don't you make the statement?."
Merkel, "What about your manhood?"
Sarkozy, "What manhood? I'm a Frenchman."
What finally bothers me more than the whole European mess (not to say we didn't create our own here in the good ole USA), is MSN's reporting of the topic. I am sick and tired of the waffling headlines day-in and day-out...and sometimes multiple times within the day. "Stocks slump on European worries"..."Stocks show gains on European plan". I would bet my next 10 paychecks that I will read both of these headlines in the next 3 days on the business ticker.
Anyone else feel this way? Is it getting to be like the Wetherman reporting here?
Our Republican leaders wanted a global economy. Now they have it, as every time a country a country sneezes our economy tanks. Lets start with the basics:
1. NO more immigration (I am sick of paying for free education, housing, babies, health care)
2. TAX the Richest 10% (After all, most of the Greedy Rich have caused Americas problems)
3. STOP Importing Foreign Goods (Bring manufacturing back to US)
4. PUT Populations Limits on Welfare, Food Stamp and Uneducated Recipients
5. WITHDRAWL all troops, tanks, planes, ships etc. and guard American Borders.
6. INSURE Food Supply as Foreign countries our buying our farms and shipping food overseas. NO FOOD SUPPLY leaves us open to being overthrown by another country.
7. Drill for Oil in US. NO OIL/FUEL etc. leaves us open to being overthrown by another country.
8. LOOK for alternative energy sources Magnetism/Hyrdrogen (Electric requires energy to produce it (What GOVERNMENT IDIOT thought this would preserve the environment and conserve energy?)
9. REDUCE all Government Salaries to $45,000 or less. That includes all Senators/Congressman
10. STOP all SUBSIDIZED PORK projects.
11. STOP PAYING PEOPLE who own farms like Senators, Congressman and farmers for NOT growing crops.
12. STOP banks, investment companies, stock brokers, mortagage lenders, realtors from RAPPING AMERICANS
13.CREATE JOBS THAT mean something. Not picking up trash on the highways or landscaping a government building.
14.MAKE a LAW that it is ILLEGAL to speak any other language other than ENGLISH in the US. (Make it punishable by law with deportation) (I AM UNEMPLOYED AND I CAN NOT GET A JOB IN FLORIDA BECAUSE THE JOBS REQUIRE YOU TO BE BILINGUAL IN SPANISH AND ENGLISH-WHAT THE HELL HAPPEND TO MY RIGHTS)
If you think the riots regarding wallstreet are over, just wait till more AMERICANS our out of work, no home, no food, desperate....... There will be a Civil War in this country.
I would only be basing a quicker recovery in housing...If the jobs situation gets stronger over the next 3-5years. At least "good paying" jobs.
There are going to be a lot of Minimum Wage jobs and Lower paying skilled labor, because of numbers of unemployed labor and skilled persons today.......Right MIRAGE....???Housing is not even starting to recover yet. There is still a huge inventory of houses on the market. And, banks are still holding back many foreclosed homes in an effort to not entirely destroy house prices. Home construction is not going to take off for about 10 years. Without those construction jobs, the economy will continue to struggle since the US has killed its manufacturing sector.
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[BRIEFING.COM] Stocks remain near their lows as the underperformance of defensively-oriented consumer staples (-0.8%) and health care (-0.6%) outweighs the relative strength of cyclical groups like consumer discretionary (+0.1%), industrials (-0.1%), and materials (+0.3%).
Investors received just two economic reports today (October Wholesale Inventories and October JOLTS), but neither one is known for being a market-mover. Similarly, tomorrow's session is also unlikely to be impacted by ... More
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