Sovereign Debt Worries Send Equities Lower

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European Debt

The story for stocks continues to be pretty much the same that it has for some time now. Worries over the growing European sovereign debt issue have equities falling lower and lower, albeit on thin trading volume. Even with some better than expected economic news in the U.S., it wasn’t enough to convince investors to begin buying stocks, at least for this past week. With a renewed frustration with our own Congressional polarization and its inability to come to an agreement on our government–debt reduction, it appears that investors are content to sit on the sidelines as we head into the holiday season.

On the pre-Thanksgiving week, the Dow Jones Industrial Average fell by more than 357 points, or 2.94%, to close at a level of 11,796.16. The broader Standard & Poor’s 500, dropped some 3.81%, to 1,215.6 – and is now negative for 2011. It was its worst week in nearly two months. The Nasdaq Composite and the Russell 2000 continued to take the brunt of loses as these indexes lost 3.97 percent and 3.39 percent respectively.For the year-to-date figures, the majority of the major indexes are now all to the downside as follows: the S&P 500, down 3.34 percent; the Nasdaq, down 3.03 percent; and the Russell 2000, down 8.20 percent. Only the Dow Jones Industrial Average is to the positive, but just by a slight 1.89 percent.Treasury securities continued to rally in light of Europe’s continuing chaos. With yields on Italy’s government bonds climbing past the 7% mark, the yield on U.S. Treasuries headed south. The yield on the benchmark 10-year U.S. note ended the week at 2.01%, down from 2.06% the previous Friday. Meanwhile the 30-year bond yield closed at the 2.99% mark, down from 3.11% the previous week. With the deadline for the so-called super committee to come up with some $1.2 trillion in deficit reductions by this Wednesday, the financial focus will more than likely shift to Washington as opposed to the European countries.


Heading into the Thanksgiving holiday, the equity markets will more than likely focus on whether the deadlines will be met by the so-called ‘super committee’ on the legislation surrounding our own deficit reduction. Keep in mind that if these legislative deadlines are not met, the earlier enacted spending cuts as to both domestic and military programs will take place. As we’ve mentioned, this panel faces a Wednesday, November 23 deadline for getting this legislation out of committee.

Other economic data for this holiday-shortened week includes Monday’s report on existing home sales, which again will probably show signs of weakness. On Tuesday, we get the revised Q3 gross domestic production figures as well as the Federal Open Market Committee minutes. The day before Thanksgiving brings us news as to the manufacturing sector and the consumer. Durable goods orders, personal income and spending, as well as consumer sentiment are on tap before indulging in our annual Thanksgiving feast.

Earnings reports will slow down considerably, although there are a few notables reporting this week including John Deere, Hewlett-Packard and Pandora. John Deere, which has a large presence overseas, may be able to provide some insight into the Chinese economy, and Hewlett-Packard’s report will be interesting, given its recent juggling of upper management. The equity markets will be closed this Thursday for the Thanksgiving holiday, and on Friday we’ll have an abbreviated session, with the markets closing at noon. From all of us at Money Management Services, Inc., we wish you and your family a happy and safe Thanksgiving! Until next week, take care!!

Sources: Barron’s, Wall Street Journal, Associated Press, Econoday, Bloomberg, Dow Jones & Company,


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