US Market continue to succumb to financials

Reports of Lehman Brothers planning to raise billions of dollars put pressure on market

US Market posted triple digit losses for the second straight day today, Tuesday, 03 June, 2008 after market traded in volatile session for the entire day. The financial sector continued to be the main laggard today as renewed angst over the possibility of further writedowns in the sector. Nine out of tens sectors posted losses today led by the energy sector as crude prices registered a massive drop. Healthcare was the lone gainer for the day.

With a better than expected economic report, market started off on a positive note today, but continued to trade in a volatile fashion. But with some pressure in the financial sector front, indices soon slipped into the red. At the end, the Dow Jones industrial Average ended the day with a loss of 101 points at 12,402. The Nasdaq Composite Index, finished lower by 11 points at 2,480. S&P 500 finished lower by 8 points at 1,377.

Twenty out of the thirty Dow stocks ended in the green today. General Motors and WalMart were the largest gainers while Boeing was the largest loser.

The only economic news of the day in US featured that April factory orders rose 1.1%, after increasing 1.5% in March. The result was better than the expected decline of 0.1%. Orders increased 2.6% when excluding transports.

Dow component GM announced today that it is shutting down four North American plants that produce trucks and SUVs in response to a shift in consumer preferences on record gasoline prices. The company is reviewing its Hummer brand, including the possibility of a complete sale.

Market came under selling pressure today on news that Lehman Brothers might raise billions of dollars of additional capital.

In a speech to international bankers, Federal Reserve chief Ben Bernanke signaled discomfort with the weak U.S. dollar, suggesting possible action by the Fed to support the weak greenback.

Crude oil prices registered drastic drop today. The strengthening of the dollar was the main reason behind the fall in prices of crude oil. The dollar rallied today after Federal Reserve Chairman Ben Bernanke signaled he's finished cutting U.S. borrowing costs for now thereby boosting the dollar. Crude prices dropped more than 3% today. Crude-oil futures for light sweet crude for July delivery today closed at $124.31/barrel (lower by $3.45/barrel or 2.7%) on the New York Mercantile Exchange.

Energy and metals dropped after Bernanke said the Fed is working with the Treasury to carefully monitor developments in foreign-exchange markets and is aware of the effect of the dollar's decline on inflation. At the currency markets on Tuesday, the dollar bounced firmly higher. The dollar index, which tracks the greenback against a basket of six major currencies, was at 73.317, compared with 72.72 before Bernanke's morning speech.

For tomorrow, the economic calendar features the release of the ADP May private employment report followed by the ISM services and weekly crude inventory reports. Major retailers will receive added attention, as traders digest May same-store sales.