S&P sinked to a 2011 low, on edge of another bear market. Europe also slid today as Greece missed its target. October started right where September left off on all kinds of bad economic news.
Oil falls to lowest level in a year on concerns about Greek debt and possible recession. However the price isn't coming down as fast as it should be due to the dollar being devalued which is the form of exchange on the purchase of a barrel.
American Airlines shares are tumbled today on a possible bankruptcy outlook.
Here are the top financial stories of the day:
1) Stocks sink, pushing S&P to edge of bear market-From the AP
The latest setback in Greece's financial crisis sent the Standard and Poor's 500 index to its lowest level of the year, putting it on the edge of a new bear market.
The index, the benchmark for most U.S. stock funds, has fallen 19.4 percent since its high for the year on April 29. A 20 percent drop would signify the start of a bear market, ending a bull market that began in March 2009. The S&P 500 has gained 76 percent since then, including dividends.
European markets slumped, dragging U.S. stocks down along with them, after Greece said it will miss deficit reduction targets it agreed to as part of its bailout deal. Benchmark indexes in Germany, France and Spain all fell 2 percent.
The Dow Jones industrial average fell 258.08 points, or 2.4 percent, to 10,655.30. The S&P 500 lost 32.19, or 2.9 percent, to 1,099.23. That's below its closing low of 1,119 for the year, reached on Aug. 8.
Indexes measuring smaller stocks fell even more than the Dow and S&P, which are dominated by large companies. The Nasdaq composite slid 79.57, or 3.3 percent, to 2,335.83. The Russell 2000 index of small companies plunged 5.4 percent to 609.49.
All 10 company groups in the S&P index fell. Banks, energy, and consumer discretionary stocks had the steepest declines. The yield on the 10-year Treasury note fell to 1.75 percent from 1.91 percent late Friday as investors piled into lower-risk investments. The yield hit a record low of 1.71 percent on Sept. 22.
"The market is continuing to trade based on what is happening in Europe, and that is going to overshadow everything else," said Quincy Krosby, market strategist at Prudential Financial. "The math (for the Greek bailout) didn't add up a year ago, and the math doesn't add up today. The market knows that and is waiting for the Europeans to acknowledge it."
The renewed concerns about Europe's debt problems pushed the euro down to $1.32 versus the dollar, a 9-month low. The stronger dollar could hurt large U.S. companies that rely on exports by making their products more expensive overseas. Coca-Cola Co. fell 3.2 percent to $65.42. Caterpillar Inc., which sells construction equipment globally, lost 4.5 percent to $70.55. Boeing, another large exporter, dropped 3.7 percent to $58.25.
"Everything that is coming out of Greece suggests that the dollar is only going to strengthen, which doesn't bode well for the international firms," said J.J. Kinahan, chief options strategist at T.D. Ameritrade. "It's tough to be bullish on anything at the moment."
The Dow briefly turned higher after 10 a.m., when the Institute of Supply Management said its gauge of U.S. manufacturing did better than Wall Street had predicted in September. The Dow and S&P turned mixed within 20 minutes, then took a sharp slide shortly after noon.
The slump started the market off on a weak note for the fourth quarter. Concerns that the U.S. economy is headed for another recession helped send the S&P 500 index, the basis for most mutual funds that invest in U.S. stocks, down 14 percent over the three months that ended in September. It was the worst quarter for the stock market since the financial crisis of 2008.
Some investors are also concerned that Friday's jobs report will show that unemployment rose from 9.1 percent in September. "If I had to bet, I would say it's more likely that more jobs have been lost than a surprise to the upside," said T.D. Ameritrade's Kinahan.
In corporate news, AMR Corp., the parent company of American Airlines, plummeted 33 percent to $1.98 as concerns flared up again that the company could be headed for bankruptcy protection. The stock hadn't closed below $2 since 2003. American is considered the most vulnerable among U.S. carriers to an economic downturn.
Bank of America Corp. plunged 9.6 percent to $5.53, the lowest price for the stock since the financial crisis in 2008. The company has fallen 59 percent since January as investors fret that the nation's largest bank will be hit with more settlements over mortgage securities that lost value after the housing bust.
Yahoo Inc. gained 2.7 percent, to $13.53, after the head of Chinese Internet company Alibaba Group
Holdings said he would be interested in buying the company. Yahoo, which recently ousted Carol Bartz as its CEO, has been trying to decide whether to sell parts of the company.
Nine stocks fell for every one that rose on the New York Stock Exchange. Volume was heavy at 5.8 billion shares.
2) Oil drops to lowest price since 2010-From the AP
Oil begins the last quarter of 2011 at its lowest level in more than a year as fears of another recession spread.
Investors are concerned about a pair of recent announcements that point to weaker demand and even lower energy prices this year. Greece, at the center of the European debt crisis, said over the weekend that it will miss spending targets it set, despite severe cost-cutting. And China's manufacturing sector appeared to cool off in September.
"We're also at a lull in the market" after the summer driving season, independent analyst Stephen Schork said. "This is when you tend to see weakness" in oil prices.
Benchmark crude on Monday fell 59 cents to $78.64 per barrel in New York. Prices were higher after tumbling as low as $76.85 earlier in the day. Oil hasn't been that low since September 2010. In London,
Brent crude dropped 36 cents to $102.40 a barrel.
An ongoing worry for investors in recent months has been Greece's debt problems and their impact on the rest of Europe. Greece has been relying on international aid to pay its bills, but further loan installments may be in jeopardy. Without more help, Greece will start running out of money in two weeks. A Greek default could spread to neighboring countries and possibly trigger widespread banking problems. That would hamper world energy demand as lending slows down and businesses cut spending.
Meanwhile, manufacturing surveys out of China pointed to weaker activity in September as prices for raw materials rose. One survey suggested manufacturing was stagnant, while another showed slight improvement.
Both were disappointments for oil analysts and traders.
China and other developing nations are expected to drive global energy growth in coming years. Sluggish manufacturing activity suggests that softer demand for energy.
In the U.S. a trade group reported that manufacturing activity grew last month, although the Institute for
Supply Management index showed that the pace of growth remained weak.
Since peaking near $114 per barrel in May, benchmark oil has dropped about 30 percent. Gasoline prices, however, have stayed relatively high, falling only about 14 percent in that time.
On Monday pump prices were down less than a penny to a national average of $3.417 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is still about 71 cents more than it was a year ago.
In other energy trading, heating oil and gasoline futures were both down about a penny at $2.7676 and $2.5228 per gallon, respectively. Natural gas lost about 2 cents at 3.648 per 1,000 cubic feet.
3) AMR Shares Swoon on Bankruptcy Fears-From The Wall Street Journal
Shares in American Airlines parent AMR Corp. collapsed Monday on renewed fears that the nation's third-largest airline by traffic might ultimately be forced to seek bankruptcy protection in a worsening economy.
In a sharp selloff during the morning, shares in the Fort Worth, Texas, carrier went into a nose dive and quickly blew through a 52-week low of $2.40 a share, well off the high of $8.98 they reached last November.
The shares continued their slide, tumbling as much as 38% to $1.83 by early afternoon Monday in New York Stock Exchange trading, although the exchange briefly halted trading several times as the shares tripped the single-stock circuit breaker. The stock rebounded slightly to trade at $2.17 a share, down 27%, at midafternoon.
AMR has steadfastly maintained that its preference and goal is to avoid a Chapter 11 restructuring, something it came very close to in 2003 before employees agreed to a big package of labor concessions. But the company's financial health has remained touch and go. In the past couple of years, AMR has underperformed its peers among big network airline by many financial measures, and is on course to deliver its fourth consecutive annual loss.
The company has said its labor costs are $800 million higher annually than those of comparable carriers because most of them have lowered their employee expenses and benefits more in recent years by virtue of their own Chapter 11 filings .
The company now is trying to renegotiate its labor contracts, seeking to wring more productivity out of its workers to close that gap. The talks generally have been unfruitful, although new leadership at its pilots union has lead to a more promising bargaining climate.
AMR also has been left behind in the consolidation wave, losing its status as the largest U.S. airline to bigger combinations created by the 2008 merger of Delta Air Lines Inc. and Northwest Airlines, and the 2010 marriage of United Airlines and Continental Airlines into United Continental Holdings Inc.
The airline's turnaround plan is aimed at securing more revenue from new overseas joint ventures with Japan Airlines and British Airways and by focusing its domestic firepower on cities where it already has a strong presence, including Chicago, Dallas and Miami.
American also is trying to beef up its heft in New York and Los Angeles, where it is being outgunned by its larger rivals.
Many analysts have begun to fret publicly in recent weeks that AMR's turnaround plan is underwhelming, especially in light of historically high prices for aviation fuel and signs that the U.S. economy is weakening.
Moody's Investors Service last month changed its outlook to negative from stable on AMR's debt, citing expectations of deteriorating liquidity, weak operating metrics and uncertainty about its ability to achieve a better cost structure.
But the company points to the fact that it has $4.2 billion of unrestricted cash and last week raised $726 million to refinance part of $1.3 billion in debt obligations coming due in the second half of this year. The $726 million of aircraft-backed bonds traded down three-quarters of a percentage point Monday to 98.75 cents on the dollar in thin volume.
AMR's debt maturities coming due next year—$1.8 billion—and in 2013—$1 billion—are lower than the $2.5 billion in obligations that came due or will come due this year. So far, the company continues to have access to credit markets, despite its towering debt burden and suddenly shrunken equity value.
AMR also said in recent investor guidance that its third-quarter unit revenue growth of 7.8% to 8.8% year over year was better than expected and its fuel costs came in a bit better than expected for the Sept. 30 quarter.
Quote of the Day from Dave Ramsey.com:
Leadership is the art of getting someone else to do something you want done because he wants to do it. — Dwight D. Eisenhower
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