Market Recap: China Falters, Banks Exposed, and Fed Causes Market to Plummet
Markets closed down on Wall Street today: Dow -3.51%, S&P -3.19%, Nasdaq -3.25%, Oil -6.53%, Gold -3.79%.
On the commodities front, Oil (NYSE:USO) fell to $80.31 a barrel. Precious metals also declined, with Gold (NYSE:GLD) falling to $1,739.60 an ounce while Silver (NYSE:SLV) plummeted 11.25% to $35.92 an ounce.
Hot Feature: U.S. Home Prices Down 3.3%
Today’s markets were down because:
1) Fed. Markets plummeted today following dire remarks on the economy from the Federal Reserve. The news of slowing growth also pushed most commodities lower, including oil, gold, and silver, while only Treasuries moved higher as investors sought one of the few safe havens left. The Fed’s announcement of Operation Twist yesterday failed to instill much confidence in the economy, and few think the measures will be enough to reverse the economic downswing over the last few months. After all the anticipation leading up to the Fed’s decision, investors were left with the understanding that not even the Fed has the power to turn this thing around.
2) China. Through all the economic turmoil that has engulfed the globe over the last few years, China has been the one shining beacon of progress and growth. However, despite the fact that China’s economy is still on track to grow 8.5% to 9% this year, its manufacturing sector has been contracting for the last three months now, according to HSBC’s manufacturing PMI. There was a lot of concern over China because heretofore it’s been the one pocket of unstoppable strength in the global economy,” said Paul Larson, chief equity strategist at Morningstar. “If that stops and China becomes a drag on worldwide growth, it could have big implications here in the U.S.” News that China might not be as infallible as once though had a host of popular Chinese stocks plummeting today, including shares of Sohu.com (NASDAQ:SOHU), Youku.com (NYSE:YOKU), RenRen (NYSE:RENN), Sina Corp. (NASDAQ:SINA), and Baidu.com (NASDAQ:BIDU), which fell nearly 11% today.
3) Banks. After Moody’s downgraded some of the nation’s top banks yesterday, investors are growing worried about the financial industry’s exposure to the sovereign debt crisis in Europe. Not only were Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), and Citigroup (NYSE:C) continuing to slide today after Moody’s downgraded them, citing the unlikelihood that the government will step in should the financial sector find itself in a similar situation to that of 2008, but the entire sector fell on concerns that Moody’s was right. Barclays (NYSE:BCS), JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS), and Morgan Stanley (NYSE:MS) were all heavy drags on the markets today. European banks were trading sharply lower for the same reason, with France’s SocGen and Credit Agricole falling 9.5% each, while Deutsche Bank (NYSE:DB) and Credit Suisse (NYSE:CS) also underperformed the markets.