Nervous investors hit the "sell" button this morning and stocks spiked lower at the open on worries over the economic recovery. Another disappointing weekly jobless number, a mixed durable goods report, and escalating concerns over Greece all helped push markets lower. Meanwhile Ben Bernanke continues day two of his testimony before Congress and President Obama is currently hosting his debate over healthcare.
It was a relatively quiet session in Asia. The Chinese Shanghai bounced for its second day in a row with a +1.2% gain. The Hong Kong Hang Seng slipped for its second day in a row with a 0.33% loss. The Japanese NIKKEI extended its losses to three days in a row with a 0.9% loss as the yen continues to tick higher against the dollar.
There were a lot more fireworks in Europe. The European Commission said economic sentiment for the 16-country euro zone continues is deteriorating. Concerns over Greece continue to rise. Earlier this week Fitch said they were downgrading the top four Greek lenders. Today both Moody's and Standard & Poor's said they might downgrade the country's credit rating, which would make things even worse for Greece since it raises the cost to borrow money. Greece has 20 billion euros in debt it has to pay or rollover by the end of May, according to Bloomberg. Labor unions are still on strike in Greece over the proposed budget cuts while credit default swaps on Greece debt continue to rise.
Concerns over a possible default by Greece and its impact on the rest of Europe sent the euro currency to a new nine-month low against the dollar. The dollar strength is weighing on commodities. Crude oil is plunging with a 3.3% decline toward $77 a barrel. Copper prices are down 1.8% but off their worst levels of the session. Gold is not showing any weakness in the face of dollar strength. Instead gold is up over $4 and erasing most of yesterday's losses. Gold futures are currently trading around $1,101 an ounce. At the end of the day the English FTSE and the German DAX closed down about 1.35%. The French CAC-40 fell 1.79%.
The economic data out this morning didn't inspire much confidence. The Labor Department said weekly jobless claims rose by 22,000 to 496,000. Once again the markets were surprised to see a rise when economists were expecting a drop toward 455,000 new claims. Meanwhile the Commerce Department said durable goods orders rose 3% in January but most of that gain was due to a big rise in aircraft orders. If you exclude the more volatile transportation component durable goods only rose 0.6% versus estimates of +1.0%.
Washington is also making headlines today. Fed Chairman Ben Bernanke continues his testimony before Congress for the second and final session of his semi-annual update. This time Ben is speaking before the Senate Banking Committee. During the Q&A Bernanke said his agency was looking into the possibility if Wall Street's investment banks had any hand in the current situation with Greece's debt problems. Bernanke also cautioned lawmakers and the markets to not overreact if the next round of economic data and labor numbers are worse than expected. He suggested that data may come in worse due to the recent blizzards that have hit so much of the country and that the weather would only have a temporary impact.
President Obama is hosting his highly publicized healthcare summit with both democrats and republicans. Obama was hopeful that there would be real debate and not an exchange of "talking points". Many have questioned Obama's sincerity to the debate process when the White House issued a new healthcare bill just three days ago.
In corporate news Dow-component Coca-Cola (KO) announced a deal to buy its North American bottler Coca-Cola Enterprises Inc. (CCE) in a deal valued at more than $12 billion. The merger was expected after rival Pepsi (PEP) purchased its top two bottlers in a move that is expected to produce hundreds of millions of dollars worth of synergies.
Currently stocks are down across the board except for a little bit of strength in the mining stocks. It looks like the selling pressure has paused with stocks churning sideways near their lows for the session. The S&P 500 index is back under the 1100 level with a 1.3% decline. The NASDAQ has fallen toward the 2200 level with a 1.3% drop. The Dow Industrials are nearing the 10,200 level with a 1.5% pull back.
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
Scanning the OptionInvestor.com play list I see that AZO is still showing some relative strength. AAPL is back under the $200 level again. BEN has fallen under the $100 mark. IBM has actually cracked short-term support near $126.00.