Steep losses at Wall Street

US stocks succumb as investors lose confidence in economic recovery

US stocks plunged drastically at Wall Street on Wednesday, 11 August 2010. Stocks continued to bleed for the entire day after investors somewhat lost confidence in the economic recovery process that the Fed has been undertaking since past year. Global and domestic economic data added further salt to the injury and stocks received no respite from their downward journey throughout the day. The dollar spiked up heading to its highest level in more than a month leading to lower commodity prices.



For the day, that ended on Wednesday, 11 August 2010, Dow ended lower by 265.42 points at 10,378.83. Nasdaq ended lower by 68.54 points at 2,208.63. S&P 500 ended lower by 31.59 points at 1,089.47. Dow was trading lower by 140 points earlier during the day.

All ten economic sectors ended lower today led by industrial, materials, and financial sectors. All thirty Dow components ended lower led by Alcoa and Walt Disney.

Market participants turned pessimistic after China reported some weaker-than-expected retail sales figures and a slight dip in industrial production during July. Japan's lackluster machinery orders report and moderate economic outlook didn't help. The Bank of England also failed to counter waning confidence in a steady global recovery with its statement that risks to growth are still to the downside.

The Commerce Department in US reported on Wednesday, 11 August 2010 that US trade deficit expanded by 18.8% in June, reaching $49.9 billion from $42.0 billion in May. The nation's trade deficit widened sharply in June on record imports of consumer goods. The widening of the deficit was much larger than expected. Market had expected the June deficit to hit $42.5 billion.

In June, imports increased sharply while exports declined. Imports rose 3.0% to $200.3 billion during the month, while exports fell 1.3% to $150.5 billion. Imports of goods alone jumped 3.3% to $167 billion, with the largest increase from imports of consumer and capital goods. Meanwhile, exports of goods alone slipped 2.2% to $105 billion, with exports of farm products at the lowest since September 2009. However, auto exports were the highest since October 2008, while exports of civilian aircraft rose slightly.

Among earning reports expected for the day, entertainment giant Walt Disney beat top and bottom-line expectations in its third quarter report and retailer Macy's reported second-quarter earnings that topped estimates while hiking its 2010 outlook.

In the latest FOMC statement issued yesterday, according to the Fed, the economic recovery is likely to be more modest in the near term than had been anticipated. The latest statement also indicated that the target range for the federal funds rate will remain at 0.00% to 0.25% and that low resource utilization and subdued inflation are likely to warrant exceptionally low levels of the fed funds rate for an extended period.

The Fed also announced that it would reinvest mortgage bond proceeds into government bonds rather than more mortgage debt, ensuring the start of another round of quantitative easing.

Crude oil prices ended substantially lower on Wednesday, 11 August 2010. Prices fell as the dollar strengthened and energy department reported rise in crude product stockpiles for last week. On Wednesday, crude oil futures for light sweet crude for September delivery closed at $78.02/barrel (lower by $2.23 or 2.28%). Last week, crude ended higher by 2.2%.

In the latest weekly inventory report, EIA reported today a decrease of 3 million barrels of oil in inventories for the week ended 6 August 2010. The EIA also reported an increase of 400,000 barrels for gasoline inventories, and a rise of 3.5 million barrels for stockpiles of distillates, which include heating oil and diesel. Market had expected a drop of 1.5 million for gasoline stocks, and an increase of 1.1 million barrels for distillates.

In the currency market on Wednesday, the dollar index, which weighs the strength of the dollar against a basket of six other currencies, rose by a huge 1.9%.

The International Energy Agency early Wednesday revised slightly upwards its forecasts for global oil demand for 2010 and 2011, but warned that there is a significant downside risk to these estimates if the economic recovery falters in the second half of the year.

Bullion metal prices ended mixed on Wednesday, 11 August 2010 at Comex. Gold prices inched up but silver dropped. Gold prices pared most of their earlier gains and settled at session lows, a dollar below the $1200 mark. Prices fell as the dollar strengthened substantially. Gold for December delivery ended at $1,199.2 an ounce, higher by $1.2 (0.1%) on the New York Mercantile Exchange. During intra day trading, prices touched a high of $1,210.2. Last week, gold ended higher by 1.8%. September Comex silver futures ended lower by 26 cents (1.4%) at $17.9 an ounce. Last week, silver ended higher by 2.6%. For the month of July 2010,

For every share gaining six fell on the New York Stock Exchange, where nearly 1.2 billion shares were exchanged. Composite volume topped 4.7 billion.

Barring Tata Motors and VSNL, Indian ADRs ended lower on Wednesday. Wipro Technologies and ICICI Bank were the main losers shedding 4.3% and 3.7% respectively. Tata Motors and VSNL soared 4.3% and 7% respectively.

For tomorrow, the initial claims data, continuing claims data and export import prices are the main economic data expected. Other than that, earning reports will continue to trickle in.