| Stocks Slide On Central Bank Inaction |
| Aug-02-2012 |
| Keywords: ecb, stimulus, fed, no action, knight capital, jobless claims, factory orders |
The stock market today suffering the wrath of disappointed investors who had been betting on central bank action on both sides of the Atlantic.
The Dow Jones Industrial Average finished the session down 92 points, well off the lows of the day. Both the Nasdaq Composite and the S&P 500 ended the day with 10 point losses.
The mood of the market today turning negative as investors got slapped with a double dose of disappointment as both the Federal Reserve and the European Central Bank offered no immediate measures aimed at stimulating economic growth.
The Federal Reserve on Wednesday offered no changes to U.S. monetary policy, only hinting more strongly that more action may come down the line if the economy deteriorates further. The Bank of England and European Central Bank followed suit on Thursday, keeping their interest rates and quantitative easing programs on hold.
ECB President Mario Draghi continued to dangle the prospect of central bank action but offered no definitive measures today. Draghi did say the central bank might begin outright open market operations, which could mean the central bank will step into sovereign debt markets. He also suggested eurozone countries activate the bloc's rescue funds for potential bond buying.
The news surrounding the central banks' inaction expected by some, but others are expressing their disappointment after the ECB and Fed last week seemed to be moving closer to taking stimulative actions.
Wall Street investors today are also reacting to more conflicting news on the U.S. economy. Weekly jobless claims last week increased just 8,000, topping out at a lower than expected 365,000 claims. Meanwhile, the Commerce Department reported an unexpected drop in factory orders. Orders during the month of June fell .5%, a full percentage point drop from growth reported in May. The unexpected drop is being attributed in part to a 2% drop in order for non-durable goods, the largest monthly decline since March 2009.
Knight Capital's nightmare only getting worse today. The market reacting to headlines that Knight's trading glitch on Wednesday cost the brokerage $440 million dollars. The brokerage claims that no client's were harmed as a result of the software error, but investors hammered the company's stock, driving the brokerage's stock down 63% on the day.
Today's selloff in the stock market driving investors into the relative safety of the dollar and debt. The yield on the government's benchmark 10-year Treasury note falling back below 1.5%.
Commodities however suffering under the weight of investor disappointment and a stronger dollar. Gold prices ended the session down $16.60 or 1%, closing at $1,590.70 an ounce. Crude oil prices giving back all of yesterday's gains that came as a result of a sharper that expected drop in weekly crude inventories. The September crude contract finished the session off $1.78 or 2%, settling at $87.13 a barrel. |
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Posted by Lou Dobbs Staff at 2:00 PM Email to a friend |
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