Big Wall Street sell-off
by Peter Switzer
Dow Jones was up an unconvincing one point to 11,952.97 overnight but the big story over the weekend was the Dow dropping 172.5 points to 11,951.91, that’s a 1.42 per cent slide. The US market has been down for six weeks in a row.
Our local All Ords is down over seven per cent since late April, while the S&P 500 is down about 5.6 per cent. This could keep on going to a 10 per cent correction.
By the way, the S&P 500 was at 1270.98 after falling 18 points over the weekend. It is expected to range trade between 1250 — the 200 day average — and 1325, which is the 50-day moving average.
Cause for falls
- Global economic slowdown fears.
- US economic data is disappointing.
- US banks are accusing the Fed of over-regulation, which is slowing economic growth, and annual stress tests of banks is a new proposal by regulators.
- The end of QE2, which means the Yanks will have less monetary stimulation.
- Investor fear is increasing with the VIX or fear index over 19.
- China’s trade surplus was lower than expected which added to global slowdown fears.
- European debt concerns with Greece downgraded by credit ratings agency, S&P, to the lowest rating in the world! The chances of a default are increasing but Greece argues the EU and IMF will come to their rescue. More worryingly, private bondholders might be forced to take some losses, which would unsettle markets. By the way, Greek unemployment is now 16.2 per cent.
- Oil concerns with a war in Libya, protests across many oil countries and OPEC’s recent failed meeting where no agreement on production levels have worried investors.
I suspect we’re in this kind of negative territory until the new US earnings season hots up in three to four weeks time. The Yanks will have to see some better economic news and this week provides plenty of data, though I’m not hopeful that we’ll get too many positive reads on the US economy.
- The Oz dollar is at 106 US cents.
- Oil is down to US$97.30 a barrel (US light sweet crude).
- Gold fell US$13.60 or 0.9 per cent to US$1,515.60 an ounce.
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Published on: Tuesday, June 14, 2011
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