US Stocks Fall on Dropping Retail Sales and Europe’s Debt Crisis

on Jun 13, 2012

On 13 June 2012, Bloomberg reported that US stocks slid, as retail sales fell for a second month in a row and fears about the sovereign debt crisis in Europe grew. Bloomberg reports that nine out of 10 groups in the Standard & Poor’s 500 index retreated, with the S&P 500 falling 0.7 percent to 1,314.88 at 4 p.m. New York time. The Dow Jones Industrial Average also followed this trend and fell 0.6 percent reaching 12,496.38. Bloomberg also reports that trading volume for exchange-listed stocks in the US was 10 percent below the three month average.

Among the reasons quoted for the low performance of the US equities are the results for retail sales in May, showing a decline for a second consecutive month. Those results in turn are due to limited job and income gains holding back consumers. Bloomberg quotes Burt White, a chief investment officer at LPL Financial Corp. in Boston, who noted in a telephone interview that consumers were starting to question the validity of the recovery and in consequence were planning for tougher times.

According to Bloomberg, consumer discretionary, commodity and industrial shares had the biggest losses. Casey’s General Stores Inc.(CASY), a Midwest operator of convenience stores, slumped 13 percent to $52.18, its biggest decline since 2008.
!m[](/uploads/story/123/thumbs/pic_1_inline.png)In addition, as reported by Bloomberg, Home Depot (HD), which is the largest US home improvement retailer, lost 2.4 percent to $50.97, while Caterpillar (CAT), the world’s largest maker of construction equipment, dropped 2 percent to $85.29. The chemical producer DuPont (DD) fell with 1.6 percent, reaching $49.11. Progressive Corp.(PGR), a large US auto insurer, fell 4.4 percent to $20.74., with claims costs rising above the company’s target. Global Payments Inc.(GPN) declined with 4.1 percent to $40.48, as the bank-card processing company reported that there might have been a hacker attach into the company’s servers.

The other major factor determining the US stocks slump is the ongoing crisis in Europe, with Bloomberg reporting that Euro-area industrial production also declined for a second month in a row in April. With the Greek elections approaching, investors are watching closely the situation in Europe and particularly whether the EU would manage to keep the country in the Eurozone.

The reported decline comes after a temporary rise, due to speculations that the Federal Reserve would take certain steps such as a new round of quantitative easing to support the US economy, after the dismal employment report from May. On 12 June, Bloomberg reported that all 10 groups included in the S&P 500 index rose both on account of an anticipated Fed stimulus and the decision of the European Central Bank (ECB) to endorse a plan to guarantee bank deposits. The ECB recently announced that it would back the European Commission’s proposal for a banking union, which would strengthen supervision of lenders and establish a deposit guarantee programme.
It remains to be seen how long the US equities downtrend will continue, as it seems that investors will keep monitoring closely the developments on both sides of the Atlantic.


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