Stocks slide, euro falls after Spain downgrade
Sunday, 30 May 2010
NEW YORK, May 29 (Reuters): World equities slid and the euro fell Friday after a downgrade of Spain's credit rating sent a new chill through markets already worried about the European debt crisis.
The downgrade by Fitch Ratings ignited a new round of selling in equities that were already lower after lacklustre US economic data injected a note of caution ahead of long holiday weekends in both the United States and the UK.
Fitch downgraded Spain's credit rating to AA-plus, and said it expects the country's adjustment to a lower debt level will materially reduce its rate of economic growth over the medium-term.
Fitch cited an inflexible labour market and a restructuring of regional and local savings banks as hindrances to the pace of adjustment.
"This should exacerbate the tremendous volatility we've seen in global stocks as the world wrestles with the idea of a debt-based collapse," said Chip Hanlon, president of Delta Global Advisers in Huntington Beach, California.
"Adding to this is the fact that no one wants to be long over a holiday weekend."
The euro fell as low as $1.2284, according to electronic trading platform EBS, near a session of $1.2281.
The euro also dropped versus the yen, and was last down 0.9 per cent at 111.59 yen.
The major US stock indexes shed more than one per cent, and US Treasuries slightly extended gains, hitting session highs after the Fitch downgrade. Benchmark 10-year notes were last up 18/32 in price, yielding 3.30 per cent.
Investors had been shunning risk even before the Fitch downgrade on Spain.
A Commerce Department report that US consumer spending failed to rise in April after six straight months of gains, cast a cloud over the outlook for the consumer-driven US economy. Traders were particularly cautious ahead of long holiday weekends in London and New York, and ready to step back and take profits after a strong equities rally Thursday.
The Dow Jones industrial average was down 119.94 points, or 1.17 per cent, at 10,139.05. The Standard & Poor's 500 Index was down 15.13 points, or 1.37 per cent, at 1,087.93. The Nasdaq Composite Index was down 32.14 points, or 1.41 per cent, at 2,245.54.
The S&P 500 and the Nasdaq had each fallen more than one per cent earlier in the day, though had pared losses sharply before the news on Spain sparked a new wave of selling.
Technology bellwether Apple Inc managed to buck the downtrend, after Asian and European customers mobbed stores as the iPad tablet computer debuted outside the United States. Apple shares rose 1.5 per cent. Bank of America Merrill Lynch raised its price target on Apple by $25 to $325 and kept its "buy" rating.
The downgrade by Fitch Ratings ignited a new round of selling in equities that were already lower after lacklustre US economic data injected a note of caution ahead of long holiday weekends in both the United States and the UK.
Fitch downgraded Spain's credit rating to AA-plus, and said it expects the country's adjustment to a lower debt level will materially reduce its rate of economic growth over the medium-term.
Fitch cited an inflexible labour market and a restructuring of regional and local savings banks as hindrances to the pace of adjustment.
"This should exacerbate the tremendous volatility we've seen in global stocks as the world wrestles with the idea of a debt-based collapse," said Chip Hanlon, president of Delta Global Advisers in Huntington Beach, California.
"Adding to this is the fact that no one wants to be long over a holiday weekend."
The euro fell as low as $1.2284, according to electronic trading platform EBS, near a session of $1.2281.
The euro also dropped versus the yen, and was last down 0.9 per cent at 111.59 yen.
The major US stock indexes shed more than one per cent, and US Treasuries slightly extended gains, hitting session highs after the Fitch downgrade. Benchmark 10-year notes were last up 18/32 in price, yielding 3.30 per cent.
Investors had been shunning risk even before the Fitch downgrade on Spain.
A Commerce Department report that US consumer spending failed to rise in April after six straight months of gains, cast a cloud over the outlook for the consumer-driven US economy. Traders were particularly cautious ahead of long holiday weekends in London and New York, and ready to step back and take profits after a strong equities rally Thursday.
The Dow Jones industrial average was down 119.94 points, or 1.17 per cent, at 10,139.05. The Standard & Poor's 500 Index was down 15.13 points, or 1.37 per cent, at 1,087.93. The Nasdaq Composite Index was down 32.14 points, or 1.41 per cent, at 2,245.54.
The S&P 500 and the Nasdaq had each fallen more than one per cent earlier in the day, though had pared losses sharply before the news on Spain sparked a new wave of selling.
Technology bellwether Apple Inc managed to buck the downtrend, after Asian and European customers mobbed stores as the iPad tablet computer debuted outside the United States. Apple shares rose 1.5 per cent. Bank of America Merrill Lynch raised its price target on Apple by $25 to $325 and kept its "buy" rating.