Jittery Investors Send Global Markets Reeling

Driven by concerns over European debt and government deficit levels far beyond European Union rules, plus uncertainties over proposed banking reforms abroad and in the United States, investors churned stock markets around the world. European stock markets, showing gains early on, had dropped 1% or 2% of their value by the end of the trading day. Asian markets closed down, also.

U.S. indices all ended the day down more than 10% from their recent April highs and are now in what is regarded as market “correction” territory. In addition to worries about the credit situation in Europe, discouraging new job data showing that applications for unemployment rose by 25,000 last week shook investor faith in the U.S. economic recovery.

To the possible advantage of motorists as they head out for the summer holidays, crude oil prices dropped to a 10-month low of just above $64 a barrel on general fears that energy demands within stumbling global economies may not reach anticipated levels.

In Germany, Chancellor Angela Merkel stirred the waters by openly warning that the euro is in danger and stressing the need for tighter fiscal rules within the euro zone. Germany unilaterally banned shorting of government bonds and some financial stocks, further upsetting wary international investors. The euro itself moved up sharply toward the $1.26 level from earlier four-year lows in the $1.21 range. Technical analysts say that despite the daily fluctuations in value, the euro is in a downward trend while the U.S. dollar is trending up.

For the day, the three major U.S. indices lost heavily, with the Dow Jones Industrial Average (an unmanaged index of 30 widely held stocks) closing at 10,068.01, losing 3.6%. The NASDAQ Composite (an unmanaged index of common stocks listed on the NASDAQ National Stock Market) slipped 4.1% and the S&P 500 (an unmanaged index of 500 widely held stocks) dropped 3.9%.

Financial markets seem to have, at least temporarily, resumed their volatile habits. If you would like to discuss the state of the markets or specific market opportunities, contact us.

Past performance is not indicative of future results. Investors cannot invest directly in an index.