Dhanvarsha: Stocks Finish Sharply Lower on Euro Crisis Jitters

Saturday, September 10, 2011

Stocks Finish Sharply Lower on Euro Crisis Jitters

Stocks held steep losses throughout Friday's session, closing down by more than 2%, after renewed fears that Greece will default on its debt prompted investors to shed risky assets before the weekend.
The Dow Jones Industrial Average closed above its intraday low of 10,936 but failed to finish above the 11,000 level, shedding 304 points, or 2.7%, to close at 10,992. The S&P 500 lost by 32 points, or 2.7%%, at 1154, and the Nasdaq finished 61 points, or 2.4% lower at 2468.

For the week, the Dow lost 2.2%, the S&P 500 fell 1.7%, and the Nasdaq held up best, slipping just 0.5%. Year-to-date, the Dow has fallen 5.1%, thanks to a 5.4% decline so far this month.

Equities endured a broad selloff Friday, spurred by rumors that Greece plans to default on its debt over the weekend even though the Greek finance ministry issued a statement denying the speculation. Another blow to sentiment was news that European Central Bank economist and Germany's representative on the board, Jurgen Stark, had quit the ECB. Stark reportedly left over disagreements about the bank's bond-buying program, an implication that deepened worries over whether euro leaders can agree on how to help Europe's debt-laden countries. The ECB said that Stark resigned due to personal issues.

"Greece is falling apart again, an important member of the European Central Bank has resigned, several banks are in free-fall or halted and no one really seems to have a plan for dealing with these issues. It is a classic case of too much uncertainty, and that is sending folks to the sidelines," said RealMoney.

"As investors became more and more nervous about holding long trading positions over the weekend, we started seeing some profit taking," writes Marc Pado, U.S. market strategist at Cantor Fitzgerald. "The market has not fared well over the weekend for the past few months, causing many to follow that trend and liquidate short-term positions on Friday."

Concerns about the European sovereign debt crisis overshadowed President Obama's speech to Congress on Thursday night, during which he detailed a $447 billion stimulus package aimed at spurring job creation, a much more ambitious proposal than the $300 billion plan expected. Republicans are expected to show their support for the $253 billion in tax cuts but will likely oppose the payroll tax holiday component of Obama's strategy.

Investors have been particularly uneasy as they await possible monetary and fiscal stimulus to jumpstart the sluggish economy. Offering up little new insight n a speech Thursday, Federal Reserve chairman Ben Bernanke essentially left the market hanging for another two weeks before the next Fed meeting on Sept. 21. Meanwhile, any jobs proposal from Washington is not expected to pass until later this year, leaving the dismal U.S. jobs market staggering without help

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