US Market hammered as credit woes turn global

BNP Paribas suspends three funds with exposure to U.S. credit markets

US Market was once again rocked by fresh sub prime and credit jitters today, Thursday, 9 August, 2007. American International Group (AIG) saying residential mortgage delinquencies are spreading and Home Depot saying current conditions might force it to reduce the pending purchase price of its supply business kicked off things on a sour note since early trading hours.

It all started in Europe earlier in the day after news that French banking group BNP Paribas had suspended three funds with exposure to U.S. credit markets which actually led three key central banks to inject liquidity in the global financial system, a step the European Central Bank last made the day after 11 September, 2001.

Market was once again reminded that liquidity crunch still remained the headlines, perhaps not only for US but globally. The Dow Jones Industrial Average today plunged by a huge 387.18 points at the end to close at 13270. Tech-heavy Nasdaq shed 56.49 points to close at 2556. S&P 500 lost 44.4 points to close at 1453.09. It was Dow’s triple digit movement for the tenth day in the past thirteen sessions.

Twenty-nine out of thirty Dow stocks closed in the red today. Boeing, Citigriup, Exxon Mobil, Wal-Mart and Caterpillar led the team of Dow laggards for the day. But due to Monday's huge rally, all the three indices are still showing gains for the week.

The broader market posted its worst one-day decline today since March 2003. All 10 economic sectors closed sharply lower. Financial sectors stocks were the worst hit. Dow components, Citigroup and JP Morgan Chase shares both dropped by more than 5%.

AIG says residential mortgage delinquencies are spreading beyond subprime

When market opened in the morning, all the three indices opened in red. Dow was trading lower by more than 200 points. Stocks got hammered right out of the gate as renewed fears about credit concerns took a toll on sentiment.

Of the 10 economic sectors trading lower, Financials paced the way amid new evidence supporting a possible credit crunch. Energy was a close second due to falling crude price.

AIG declared a 32% jump in its Q2 earnings today. But brokerage and insurance stocks continued to bleed after the company said that mortgage delinquencies spreading beyond subprime.

Key leadership continued to deteriorate throughout the day. While widespread weakness throughout Financials was the biggest overhang for stocks, the growing lack of enthusiasm for the Technology sector and its good growth prospects took an added toll on the broader market.

Selling remained the name of the game for the rest of the day and in the final half an hour of trading, Dow sank by another hundred points.

Majority of July same-store sales figures misses forecasts

Retailers were another blemish and were looked weak throughout the day as the bulk of July same-store sales figures missed forecasts. Wal-Mart shares fell 4% today after the retailer said its July sales at stores open at least one year rose 1.9%.

Crude oil futures carried on with downward journey today as fresh credit concerns once again hit Wall Street. Concerns about slowdown in US’s economic growth which will lead to lower energy consumption led to slipping crude prices. The slowdown comes at a time when oil inventories are 11% above the five-year average. Crude-oil futures for light sweet crude for September delivery closed at $71.59/barrel (lower by $0.56/barrel or 0.78%) on the New York Mercantile Exchange.

At the New York Stock Exchange, volume hit nearly 2.8 billion shares, with declining issues outpacing advancers nearly 4 to 1. At the Nasdaq, 3.5 billion shares exchanged hands, with declining stocks topping advancing issues by nearly 2 to 1.

With a handful of companies expected to declare their earnings tomorrow, investors will focus on Import and Export Prices reports which will be out before market opens. Also worth attention will be the Treasury Budget at 14:00 ET.