Weekly Market Recap: Greece Confuses the Cost of Borrowing Money, MF Global Bombs, Groupon Passes the Bag

DJIA 11,983 S&P500 1,253 Nasdaq 2,686 Gold 1,755 Oil 85

The Dow (NYSE:DIA), S&P (NYSE:SPY) and Nasdaq (NASDAQ:QQQ) pulled back as Greek leaders suddenly forgot that their previous standard of living was based on money they bought from neighbors. On the commodities front, Oil (NYSE:USO) pulled back $8 amidst more unknowns for the global economy, while Gold (AMEX:GLD) strengthened in the face of more chaos.

Hot FeatureIs Europe Warming Up Gold for its Final Act?

Now, for our analysis of the 15 reasons markets moved this week:

Monday

1) Europe. Italian and Spanish bond yields soared, prompting the European Central Bank to buy the debt. Meanwhile, though European leaders agreed last week to increase the European Financial Stability Facility rescue fund to 1 trillion euros, they’re now facing difficulties finding outside contributors. At the same time, MF Global Holdings Ltd. (NYSE:MF), the futures broker that made big bets on European sovereign debt, filed for U.S. Chapter 11 bankruptcy protection today after talks to sell its assets fell through. While the worst-case scenario for Europe seems off the table, at least for now, they still have a long way to go to shore up the region’s finances. 

2) Currency. The Japanese government stepped in early Monday to push down the yen’s (NYSE:FXY) value in international currency markets. The move immediately sent the dollar rising against major global currencies on safe-haven demand, putting pressure on commodities priced in dollars, such as oil and gold. The dollar climbed 2.9% against the yen.

3) Banks. JPMorgan (NYSE:JPM), which, according to an MF Global court filing, has about $1.2 billion worth of claims on the brokerage, fell 5.26% to $34.76, leading banking stocks lower. Goldman Sachs (NYSE:GS), Citigroup (NYSE:C), Morgan Stanley (NYSE:MS), Bank of America (NYSE:BAC), UBS (NYSE:UBS), and Wells Fargo (NYSE:WFC) were among the worst-performing stocks today.

Tuesday

1) Greece. Greek Prime Minister George Papandreou surprised European leaders Monday when he called for areferendum on the new aid package for Greece, putting austerity measures and potentially the nation’s membership in the euro zone to a popular vote. Should Greeks vote down the structural changes required of Greece per the terms of its bailout, it could break the deal between Greece and its troika of foreign lenders — the European Union, European Central Bank, and International Monetary Fund — leaving the country to find its own way back from recession while increasing the likelihood that its problems will infect other members of the euro zone, namely Italy. The news has befuddled European leaders from German Chancellor Angela Merkel to French President Nicolas Sarkozy, and created division within Papandreou’s own party. 

2) Greece. The Institute of International Finance reaffirmed its commitment, on behalf of private banks and other institutions, to the October 27 agreement with European leaders toaccept a 50% writedown on Greek government bonds following Prime Minister George Papandreou’s referendum call, which is escalating fears that the debt deal will fall through. Banks’ willingness to accept such a large haircut should evidence just how important it is that Greece accept the terms of its bailout in order to keep the country going and avoid default. Banks could be looking at even bigger writedowns if Greeks reject austerity measures and lose their bailout, leaving the industry at the center of a tug-of-war. Needless to say, the financial sector took a huge hit in trading today. Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC), Citigroup (NYSE:C), RBS (NYSE:RBS), Barclays (NYSE:BCS), UBS (NYSE:UBS), Wells Fargo (NYSE:WFC), Deutsche Bank (NYSE:DB), and just about every other bank saw shares plummet today. Of course, news that Credit Suisse (NYSE:CS) would cut another 1,500 jobs while scaling back its investment banking business in order to help meet new capital requirements after reporting disappointing third-quarter results didn’t help the situation.

3) Greece. Once again, investors were ruled by their fears over the sovereign debt crisis, largely ignoring some rather positive news from the auto industry. Most U.S. automakers posted year-over-year sales gains for October, with many reporting double-digit gains. General Motors (NYSE:GM) kicked off today’s industry reports with a bang, announcing its 19th consecutive month of year-over-year gains. Kia, Hyundai, Nissan, Mercedes-Benz, Audi, Ford (NYSE:F), and Chrysler all announced gains, but given the extent of their declines in trading today, one would think their reports were more like that of Toyota (NYSE:TM), one of the few to report a decline in sales.

Wednesday

1) Greece. Though Greece’s referendum on austerity measures still has the potential to seriously screw up the euro-zone’s plan to combat the region’s ongoing debt crisis, an integral part of which is a 50% writedown on Greek debt meant to help the nation avoid default, the picture isn’t so grim as it seemed yesterday. Several high profile meetings are taking place in Cannes today, where global leaders are gathered for a G-20 summit scheduled to begin tomorrow. Though all eyes are still on Greece, the appearance of a united front tackling the issue before there even is an issue has investors skittish, but not yet running for the hills. Greek Prime Minister George Papandreou, though it was his call for the referendum that created the mess, feels assured that his people will ultimately see the necessity of the austerity measures and the bailout, allowing everything to go forward as planned. 

2) Fed. Late in the day, Federal Reserve officials announced their lowered outlook for U.S. economic growth in 2012, forecasting that unemployment will average between 8.5% and 8.7% by the final three months of next year. While Fed Chairman Ben Bernanke announced no new policies, he left the door open for more easing down the line, saying that the Fed is “prepared to take further action” to sustain the economic recovery. 

3) Banks. After two days of sharp declines, markets were in the mood to rally today, with banks reaping the rewards. Bank of America (NYSE:BAC) started the day higher and held onto a 5% gain throughout, while JPMorgan (NYSE:JPM), Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), and Morgan Stanley (NYSE:MS) all tacked on about 3%. It’s fair to say Bank of America gained an extra boost from an announcement yesterday that it would not be charging debit-card users $5 per month afterall. Of course, that means the bank will have to make up the billions of dollars in revenue it will lose because of new debit-card regulations some other way, but that wasn’t enough to spoil it for investors.

Thursday

1) ECB. The European Central Bank unexpectedly cut its main refinancing rate by 25 basis points to 1.25% in a surprise move Thursday, acting boldly to support the struggling European economy. The ECB also reduced the interest rate on its deposit facility to 0.5% and the rate on the marginal lending facility to 2.0%. The cut marks a reversal in policy after the ECB increased its rates in July and April, becoming the first major central bank to do so. Markets are already looking for hints that the ECB might further cut rates before the end of the year. With Mario Draghi now in charge, stepping in Tuesday to take over Jean-Claude Trichet’s position as president of the ECB, investors will be waiting to see whether the ECB will make other policy changes, especially whether it will boost its government bond-buying program.

2) Greece. Greek Prime Minister George Papandreou officially called off his plan to hold a referendum today, after which the entire world breathed a collective sigh of relief. Had Greeks rejected the debt deal meant to prevent their government from going into default, the repercussions would have been felt throughout the world, and likely would have toppled other at-risk countries in the euro-zone, namely Italy and Spain. Though Greece’s troubles are far from over, and we have yet to see whether the debt deal hammered out between European leaders last week in Brussels will effectively combat the region’s debt crises, at least the plan isn’t dead in the water, as it could have been come early December, when the referendum was scheduled to take place. 

3) Retail. Investors fled retail stocks after many October same-store sales reports came in lower than expected. Of the 17 retailers reporting results, about 80 percent missed estimates, according to Thomson Reuters data. Among retailers reporting disappointing results were Macy’s (NYSE:M), Gap Inc. (NYSE:GPS), Limited Brands (NYSE:LTD), Wet Seal (NASDAQ:WTSLA), Hot Topic (NASDAQ:HOTT), and Abercrombie & Fitch (NYSE:ANF).

Friday

1) G-20. Global stocks moved downward today after the Group of 20 nations failed to agree on increasing the resources of theInternational Monetary Fund, a move that European governments had hoped would allow them to tap more foreign aid to help in crisis-fighting efforts.

2) Jobs. Though U.S. employment rose less than expected in October, when coupled with upward revisions to prior months’ job gains, it was enough to effect a drop in the unemployment rate, which last month reached a six-month low of 9.0%. Today’s Labor Department report suggests that the economy is gaining momentum, and that there is underlying strength in the labor market. However, Europe’s debt crisis still threatens to derail the recovery, riling global financial markets and pushing consumer confidence to recessionary levels. Furthermore, the U.S. Federal Reserve on Wednesday raised its projections for unemployment in 2012.

3) Banks. Following a tumble in European lenders, American banks slumped. Even as the indexes slowly recovered after a sharp drop early in the day, banks stayed lower. Bank of America (NYSE:BAC) saw its share price fall more than 6% after disclosing that it would convert debt into more equity. Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), Credit Suisse (NYSE:CS), and Morgan Stanley (NYSE:MS) also fell.

BONUS: Groupon Analyst Cheat Sheet.

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