Weekly Market Recap: Nasdaq Drops 4%, Eurozone Unknowns Persist

DJIA 11,796 S&P500 1,215 Nasdaq 2,572 Gold 1,725 Oil 97

The Nasdaq (NASDAQ:QQQ), S&P 500 (NYSEARCA:SPY), and Dow Jones Industrial Average (NYSEARCA:DIA) all took another dive after bipolar headlines about Europe switched daily. On the commodities front, Oil (NYSEARCA:USO) shed a buck, while Gold (NYSEARCA:GLD) ticked down a bit too.

Trending Now: Gold Demand Increases As Central Bank Purchases Jump 556%.

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

Monday

1) Europe. Following Friday’s big rally, markets witnessed a slight pullback today as investors grew wary of whether political transitions in Italy and Greece would be enough, in and of themselves, to effect the necessary changes to see the region through it’s sovereign debt crisis. That uncertainty led investors to reel in their enthusiasm until further developments prove the interim governments’ mettle.

2) Apple and Amazon. Apple (NASDAQ:AAPL) sold off to a 5-week low today after a bearish note from Goldman’s Bill Shope inferred that iPad demand could be a bit soft, and that a cheaper iPad could be needed to encourage price-sensitive tablet buyers. Meanwhile, though fairing poorly against the iPad in its first round of reviews, Amazon’s (NASDAQ:AMZN) Kindle Fire tablet has the benefit of being significantly cheaper than its main competition, allowing Amazon shares to move counter to market trends today. Apple closed down 1.39% while Amazon closed up 0.71%.

3) Banks. Financial stocks were under pressure, with JPMorgan (NYSE:JPM) and Bank of America (NYSE:BAC) leading the Dow’s decline, while shares of Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), and Citigroup (NYSE:C) all fell more than 2%. 

BONUS: Are Big Banks Boosting Revenue With Hidden Fees?

Tuesday

Today’s markets were up because:

1) Europe. Stocks opened lower today as bonds yields in Europe climbed. While Italian bond yields have been climbing, reaching a euro-era record last week, it was the news that yields in neighboring Spain and France were also on the rise that worried investors today. Yields on Spain’s 10-year bond have climbed to about 6.3%, and France’s bond yields are now around 3.67%.

2) U.S. Markets gained ground in the afternoon as positive economic data in the U.S. temporarily overshadowed the sovereign debt crisis in Europe. Retail sales rose 0.5% in October, beating expectations, while the New York manufacturing index unexpectedly returned to positive territory after five months in the red, and producer prices declined 0.3% in October following a 0.8% rise in September.

3) Nasdaq. The tech-heavy Nasdaq outperformed the S&P 500 and the Dow today as Apple (NASDAQ:AAPL), Intel (NASDAQ:INTC), and Cypress Semiconductor Corp. (NASDAQ:CY) climbed higher. Berkshire Hathaway’s recent 13-F filing showed it had purchased Intel, while Cypress is riding the Halo effect of Buffet’s buy. Apple shares rebounded from losses last week as suppliers for its new “15-inch ultra-thin notebook model” started shipping components.

BONUS: Will the FHA Need a Taxpayer Bailout?

Wednesday

Today’s markets were down because:

1) Europe. Yields on sovereign debt continued to hit record highs in more countries around the euro zone today, and the region’s hardest-hit economies are showing no signs of improving. Now even Germany’s debt level is a “cause for concern,” according Luxemburg Prime Minister Jean-Claude Juncker. Germany got fewer bids than its maximum target at an auction of two-year notes, as the government agreed today to pay the lowest yield on record. With Germany seemingly entering the fray, investors grew increasingly concerned that European Central Bank intervention might be necessary. Meanwhile, though Italy and Greece’s new governments are moving forward, their leaders have yet to prove that they can effectively stamp out the debt crisis before it spreads.

2) U.S. While the European crisis continues to worsen, investors are clinging to hope offered by reports demonstrating that the U.S. economy might be resilient enough to continue to grow, despite the increasing drag of Europe. Two separate reports today showed homebuilder confidence rising for the second straight month, and industrial production jumping more than expected. Meanwhile, U.S. Treasuries got a boost, with the yield on the benchmark 10-year note down to 2.02% today from 2.06% late Tuesday. The news was enough to buoy markets for a bit, but ultimately the drag of Europe and climbing oil prices resulted in a late rout that saw markets tumbling from slightly positive territory deep into the red.

3) Banks. Despite the appearance that the U.S. has avoided recession, at least for now, bank stocks remained under pressure amid questions as to how Europe’s sovereign debt crisis could impact global financial institutions. Shares of Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), Citigroup (NYSE:C), Bank of America (NYSE:BAC) and Jefferies (NYSE:JEF) were among the markets’ biggest losers today.

Thursday

Today’s markets were down because:

1) Europe. Germany continues to object to letting the European Central Bank act more aggressively to contain the crisis, while France, finding itself in danger of contagion as bond yields climb to euro-era highs, renews its efforts to convince Germany that ECB support for Europe’s rescue fund is the best, and possibly only, way to counter the debt crisis. With the euro zone’s two largest economies divided, Greece and Italy still trying to get their footing with new governments, the situation in Europe was more than enough to rattle investors today.

2) Jobless. Initial jobless claims came in lower than expected at 388,000 for the week ending November 12, down from 390,000 in the week prior, a figure that was the lowest since April. Any number below 400,000, if sustained for a significant amount of time, implies that the economy is adding jobs, and that unemployment is in decline. However, with the Occupy Wall Street movement in New York and around the world grabbing headlines, and Europe continuing to be at the forefront of business and economic news, U.S. economic data just wasn’t enough to buoy markets.

3) Tech. Although Angie’s List (NASDAQ:ANGI) hit a home run with its initial public offeringtoday, Hewlett-Packard (NYSE:HPQ), Intel (NASDAQ:INTC), and Cisco (NASDAQ:CSCO) were among the many tech stocks weighing down the market as the entire computer industry has been hit by a decline in Western European PC shipments.

BONUS: These Top U.S. Banks are Vulnerable to European Crisis

Friday

Today’s markets were mixed because:

1) U.S. economy. The Conference Board’s index of leading indicators in the U.S. surprised to the upside Friday. The latest reading rose 0.9% in October, better than the 0.6% rise economists expected, a sign that the American economy may pick up in the coming months.

2) EU. Borrowing costs in Italy and Spain eased after record high levels in recent days pressured the broader market, a signal that bond investors are less fearful of a default by those countries. However, leaders of Germany and the U.K. were unable reconcile their differences on plans for European treaty changes and a financial transaction tax at a meeting in Berlin today after European Central Bank chief Mario Draghi had criticized euro-zone leaders earlier in the day for failing to follow through with plans to resolve the debt crisis.

3) Companies. Companies that rely most heavily on economic expansion to make money were the best-performing stocks today. Hewlett-Packard (NYSE:HPQ) popped 2.57%, more than any of the Dow’s other 29 components. Boeing Co. (NYSE:BA) rose 2.07%. However, after a couple of disappointing earnings reports, ketchup-maker H.J. Heinz Co. (NYSE:HNZ) and retailer Gap Inc. (NYSE:GPS) both slid deep into negative territory.

BONUS: ECB May Fund Bailouts Through Loans to IMF.

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