3 Reasons Markets Were Down As Financials Continued their Downward Spiral

Markets closed down on Wall Street today: Dow -1.57%, S&P -1.50%, Nasdaq -1.62%, Oil +0.24%, Gold +1.70%.

On the commodities front, Oil (NYSE:USO) climbed slightly to $82.58 a barrel. Precious metals were also up, with Gold (NYSE:GLD) climbing to $1,853.00 an ounce and Silver (NYSE:SLV) rising 5.14% to $42.81 an ounce.

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Today’s markets were down because:

1) Europe. European shares continued Thursday’s sell-off after JPMorgan (NYSE:JPM) economists lowered their estimates for economic growth in the U.S., following a similar move by Morgan Stanley (NYSE:MS) yesterday. “The market is very concerned about the deteriorating outlook for global growth in general and the United States in particular,” said Marcus Svedberg, chief economist at East Capital. While poor economic forecasts in the U.S. have been hurting European markets, euro-zone fiscal problems are also to blame for the sell-off, both in the U.S. and abroad, as investors are fearful that the region’s debt crises will infect the financial sector in Europe, which has branches in the U.S.

2) News Jobs. Sounds good, right? Maybe not. While payrolls climbed in 31 states in July, the unemployment rate in 28 states actually grew. Michigan’s unemployment rate rose 0.4% to 10.9%, the third-highest unemployment rate in the country, despite adding 23,000 jobs, making the state third in the nation behind New York and Texas in terms of added payrolls. And Michigan wasn’t the only state to add jobs while watching its unemployment rate rise. The working population in this country continues to grow, and job growth just can’t keep pace.

3) Bank of America. While Bank of America (NYSE:BAC) has lately been tending to weigh down markets anyway, news today that the bank planned to cut 3,500 employees by the end of the current quarter had a particularly depressing effect. BAC joins HSBC (NYSE:HBC) and Llloyds (NYSE:LYG) in a round of very public jobs cuts made necessary by new capital requirements under Basel III and Dodd-Frank that are intended to protect the economy from the sort of banking that led to the financial crisis, which doubled the nation’s unemployment rate in just a few years. Ironic, isn’t it?

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