Market Recap: FOMC and IMF to the Rescue

Markets closed down on Wall Street today: Dow -0.40%, S&P -0.41%, Nasdaq -0.07%, Oil +0.92%, Gold +1.26%.

On the commodities front, Oil (NYSE:USO) climbed to $97.81 a barrel. Precious metals were also up, with Gold (NYSE:GLD) rising to $1,699.70 an ounce while Silver (NYSE:SLV) climbed 5.19% to settle at $32.81.

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Today’s markets were down because:

1) Spain. Yields on short-term Spanish bonds surged to a fourteen-year high on Tuesday, signaling that an election victory on Sunday for the conservative People’s Party has done little to instill faith in the government’s ability to see Spain through the financial crisis. However, Spain’s skyrocketing bond prices became less of a reason for concern when the International Monetary Fund announced that it had enhanced its lending facility and introduced a new six-month liquidity line, creating a safety net for Europe.

2) FOMC. Minutes from the Federal Open Market Committee’s last meeting show that the Federal Reserve might be considering further easing. The news helped equities recover this afternoon from a drop spurred by a Commerce Department report that downwardly revised earlier estimates of third-quarter gross domestic product.

3) Banks. In October, the 10 largest U.S. prime money market funds had a 9% M/M drop in their exposure to EU banks and enlarged their Treasury holdings to almost 30%, according to Fitch. The news hit European banks hard, including Deutsche Bank (NYSE:DB), Credit Suisse (NYSE:CS), Barclays (NYSE:BCS), Lloyds (NYSE:LYG), RBS (NYSE:RBS), UBS (NYSE:UBS), HSBC (NYSE:HBC).

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