USA Stocks: Worst week in 2011

Stocks ended Friday's session sharply lower, posting their worst weekly performance in more than a year, as investors grow increasingly worried that Washington may not reach a deal to raise the debt ceiling before the deadline.

At the preliminary close, the Dow Jones industrial average (INDU) fell 97 points, or 0.8%, to close at 12,143. Friday's selling was broad, with 28 out of the Dow's 30 members trading in the red. The blue chips were led lower by shares of drug maker Merck (MRK, Fortune 500) and technology company Hewlett-Packard (HPQ, Fortune 500).

For the week, the Dow sunk 4.2% -- its worst weekly performance since June 2010.

The S&P 500 (SPX) traded down 8 points, or 0.7%, to 1,292; and the Nasdaq Composite (COMP) lost 10 points, or 0.4%, to 2,756. The S&P 500 dropped 3.6% and the Nasdaq lost 3.9% for the week.

Along with the debt ceiling, investors had to work through a disappointing government report showing the U.S. economy grew at a 1.3% annual rate in the second quarter. The data was far worse than expected.

"The GDP number was nothing short of a disaster and worse," said Dave Rovelli, managing

director of US equity trading at Canaccord Adams. "We went from little growth to no growth."

The Triple-A debt club

America's Debt Crisis: Investors remained unnerved after House Speaker John Boehner delayed a vote late Thursday on his plan to raise the debt ceiling. However, after the initial delay, Boehner's bill now has the votes to pass the House. Republican leadership apparently agreed to attach a balanced budget amendment to Boehner's bill to help court the Tea Party.

The market's fear factor -- the CBOE Market Volatility Index (VIX), commonly called the VIX -- jumped up 8.2% in part on both the GDP and debt ceiling news. That's still below 30, which denotes high fear in the marketplace, but the index has shot up more than 46% in just the past five days.

"People are just crossing their fingers that these morons in Congress will get a deal done by Monday," Rovelli added.

But even if Boehner's plan does pass the House, Senate Majority Leader Harry Reid has promised the Democratic-controlled Senate will block it, and President Obama re-emphasized on Friday that he would veto it.

But investors are mostly positive that a deal will get done.

"There's enough ideas in all the bills that have passed in the House and the Senate, that we can cobble something together that everyone can agree to," Orlando said.

Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 2.83% from 2.95% late Thursday.

Short-term Treasuries saw moderate selling on Friday, as investors pulled money out of securities that would likely be the first affected by a government default. The yield one-month T-bill was up to 0.18% from 0.15% Thursday.

Currencies and commodities: The dollar strengthened against the euro and British pound, but weakened against the Japanese yen.

Oil for September delivery fell $1.74, or 1.8%, to $95.70 a barrel.

Gold futures for August delivery jumped $14.90, or 0.9%, to $1,628.30 an ounce. Earlier in the session, gold hit an intraday record of $1,634.90 an ounce.

Companies: Drugmaker Merck (MRK, Fortune 500) said it plans reduce its workforce by 12% to 13% from 2009 levels by the end of 2015, as the next phase of a restructuring program. Shares fell 2%

Shares of Newell Rubbermaid (NWL, Fortune 500) rose 8% after the company said it earned 46

cents a share in the second quarter, beating forecasts by four cents. The household products company also lowered its full-year guidance, citing higher commodity costs and weaker sales.

Shares of online travel site Expedia (EXPE) jumped 9%, after the company reported better-than-expected earnings.

Economy: The Chicago purchasing managers index fell to a reading of 58.8 in July. Economists had expected a reading of 58, according to Briefing.com. The level still indicates an expansion in the region's manufacturing activity.

World markets: European stocks fell moderately on Friday. Britain's FTSE 100 lost 1%, the DAX in Germany was off 0.4% and France's CAC 40 slid 0.9%.

In a widening of Europe's debt crisis, Moody's said it may downgrade Spanish debt. The credit rating agency said that while the country's sovereign rating was being placed under review, any downgrade would most likely be "limited to one notch."

Asian markets ended lower. The Shanghai Composite edged down 0.3%, the Hang Seng in Hong Kong fell 0.6% and Japan's Nikkei declined 0.7%

US equity markets end mixed amid Greece debt woes

The US equity markets ended mixed in thin & choppy session amid Greece's ongoing debt woes and ahead of the quadruple witching today as better than estimated housing starts and jobless claims tempered concerns of a economic slowdown.

The Dow Jones Industrial Average gained 64.25 points or 0.54%, to close at 11,961.52 and S&P 500 Index rose 2.22 points or 0.18%, to end at 1,267.64. However, NASDAQ Composite fell 7.76 points or 0.29%, to finish at 2,623.70.

Richard Ross, technical analyst, Auerbach Grayson said, "All of our work continues to suggest that the S&P remains vulnerable to an extension of the decline down to 1150 level, on a sector level, on an intra-market level, on a macro level - all signs point to lower levels in the S&P 500."
On economic data front, there was some better-than-expected news. Housing starts rose more than expected and permits for future construction touched a five month high in May. New applications for jobless benefits fell to 414,000 in the latest week from an upwardly revised 430,000 in the week before.

The US current account deficit increased in the first quarter on strong imports. The deficit represented 3.2% of US gross domestic product.

In economic data to watch out for, the consumer sentiment index for June is expected to deliver a slight rise. Consensus figures depict a rise from 74.3 for May to 74.5.

European markets fell to a three-month low as political instability in Greece added on to the investor worries over the country's acute debt issues. France's CAC fell 0.4% and Britain's FTSE lost 0.76%. Germany's DAX was flat.

Meanwhile the Greek state television says prime minister, George Papandreaou will announce his new cabinet line up today. The PM's plan to form a new government yesterday fell into disarray after two key party members resigned citing disagreements with his economic policy.
There was some reassurances from the EU's top economic official Ollie Rehn. Rehn said that the next tranche of aid about 12 billion euros will be released early next month.

In the currency space, the euro pared its decline against the dollar after reaching a three-week low amid speculation that an agreement between the European Union and the International Monetary Fund may allow Greece to avoid a debt default.

In commodities, oil gains for a second day after reports showed that US housing starts rose more than forecast in May and fewer Americans filed applications for unemployment benefit, signaling fuel demand may increase.
Copper declines for a second straight day, weighed down by economic recovery fears reflected in weak manufacturing growth in the United States and a deteriorating debt situation in Greece.