American investors focused on the European crisis as European Union officials signaled a delay in paying the next bailout tranche to Greece.
Concerns about a potential exit of Greece (Grexit) from the Eurozone were re-ignited on Thursday as American investors reviewed the latest bit of bad news in the never-ending Eurozone debt crisis (NYSEARCA:FEZ). On the morning after the Greek Parliament narrowly approved an €18.5 billion package of budget cuts while anti-austerity demonstrations escalated into riots involving the arrests of more than 20 people, European finance ministers have decided to delay issuing the next bailout tranche to Greece. The €31.5 billion payment had been expected for next week, assuming that the Greek Parliament would have approved its 2013 budget on Sunday. On Monday, the “troika” of lenders to Greece (the European Union, the European Central Bank and the IMF) were to meet and approve payout of the next tranche. Nevertheless, on Thursday morning, an EU official – speaking on condition of anonymity – informed an American reporter that the decision to release the funds might not be made until the final days of November. The report caused the major American stock indices to give up their early-morning gains and head significantly into the red. Chart courtesy of Stockcharts.com
The Department of Labor’s weekly report on initial unemployment claims indicated that the advance figure for new claims filed during the week ending November 3 was 355,000. The number reflected a decrease of 8,000 from the previous week’s total. Nevertheless, the DOL warned that the figure could be significantly revised upward next week because of reporting complications resulting from Hurricane Sandy. New Filings for Jobless Benefits Continue to Decline
As of 2:09 EST, the Dow Jones Industrial Average declined by 59 points (0.46 percent) to 12,873. The S&P 500 Index fell 0.65 percent to 1,385 – staying below its 50-day moving average of 1,434.22 (NYSEARCA:SPY). The Nasdaq Composite dropped 0.83 percent to 2,912 (NASDAQ:QQQ). The Russell 2000 Index sank 0.79 percent to 798 (NYSEARCA:IWM).
The “Dollar Bull” Index ETF (NYSEARCA:UUP) advanced by 2 cents (0.09 percent) to 22.15 as of 1:27 EST.
As of 1:20 EST, the S&P 500 Volatility Index – or VIX – declined 3.98 percent to 18.32, although the VIX Short-Term Futures ETN made a 0.54 percent advance to 37.15 (NYSEARCA:VXX).
The major European stock indices were mixed on Thursday, after a disappointing report on German exports confirmed Mario Draghi’s observation that the Eurozone debt crisis would affect Germany’s economy. News of the disclosure from the EU source concerning the delay in payment of the next bailout tranche to Greece had not been reported before the close of the European markets. The Euro STOXX 50 Index finished Thursday’s trading session flat on the day at 2,479 (NYSEARCA:FEZ). The FTSE 100 Index dropped 0.27 percent to 5,776 (NYSEARCA:EWU). The German DAX Index fell 0.39 percent to 7,204 (NYSEARCA:EWG). France’s CAC 40 Index dipped 0.06 percent to 3,407 (NYSEARCA:EWQ). Spain’s IBEX 35 Index declined 0.48 percent to 7,624 (NYSEARCA:EWP). Italy’s FTSE MIB Index fell 0.64 percent to 15,194 (NYSEARCA:EWI).
As of 1:47 EDT, the euro declined 0.25 percent against the dollar, trading at $1.2739 (NYSEARCA:FXE).
On London’s ICE Futures Europe Exchange, December futures for Brent crude oil declined by 3 cents (0.03 percent) to $105.97/bbl. (NYSEARCA:BNO, NYSEARCA:USO).
SPDR EURO STOXX 50 ETF (NYSEARCA:FEZ) -0.77% diverging from the closing price of the Euro STOXX 50 Index, since reports of the anticipated delay in payment of the next bailout tranche to Greece had not yet hit the wires when the European markets closed.
Financial Select Sector SPDR ETF (NYSEARCA:XLF) -0.16% retreating from its earlier advance after JPMorgan Chase (NYSEARCA:JPM) pulled the sector higher following the Federal Reserve’s approval of the bank’s stock buyback plan.
iShares Barclays 20+ Year Treasury Bond Fund (NYSEARCA:TLT) +1.99% as declining stock prices reduced investors’ appetite for risk, making the safe haven of government bonds more attractive.
SPDR S&P 500 INDEX ETF (NYSEARCA:SPY) -0.67% as investors become more risk-averse as a result of revived concerns about a potential Grexit from the Eurozone. Airline Stocks Are the Lone Group of Strength
Bottom line: The major stock indices retreated from their early-morning gains as a result of an anonymous report from an EU official that approval of the next bailout tranche to Greece might not be paid until the end of November.