The major indices closed lower Thursday as the shares of Citigroup (C) and Bank of America (BAC) led the collapse. C plunged -13.8% to $2.51 and BAC closed down -14.0% at $3.93. The DJIA fell to a close of 7465.95, which is the lowest close since October 2002, which was the cycle low on the 2000-2002 Bear market.
By the end of the day, the S&P 500 (-9.48 -1.20% to 778.94) and NASDAQ Composite (-25.15 -1.71% to 1442.82) were also extremely weak as traders are close to capitulation in the Financials (XLF -5.3%). The Toronto Composite (+9.40 +0.11% to 8185.4) recovered a bit from the losses of the previous day, while the Venture Board (-13.72 -1.50% to 902.10) was looking more like the Composite on Wednesday.
In NY, the Financial sector, led south by the Banks ($BKX -6.8%), was the worst hit, but Tech (XLK -2.4%) was also weak, largely because of the semiconductors ($SOX -5.2%). As $GOLD paused, losing -$1.70/oz, the goldminers ($XAU -4.6%) were also dropped hard in the broad market sell-off. Many of the goldminers, in fact, had reported solid earnings during the past two days, so the gold bulls were disappointed, for the day at least. The defensive Consumer Staples sector (XLP +1.3%) was up on the day.
The Financial sector and the issue over the size and implications of the credit default swap crisis at Citi and Bank of America are at the core of the market’s problem, which is actually helping the gold trade.
Traders have lost confidence in Treasury Secretary Tim Geithner’s financial system rescue plan or lack thereof. Economists are using the opportunity to spin their tales of woe, with media personality Nouriel Roubini now opining that countries will soon renege on their debts. All this background has served to push the price of gold almost to $1,000 Friday morning, and the equity futures much lower.
Oil prices recovered +$2.77/bbl to close at 40.18, but with the front month futures contract expiring today, April futures are looking better. At least they were at the close yesterday, but this morning had weakened just over -$1.00/bbl to just over 39.
Earlier in the day Friday, the European bourses were getting hammered as the talk was that the western Europe banks have had to take massive write-downs on their eastern European loans. At 7:38am ET, the French CAC (-2.91%), the German DAX (-3.08%), and the UK FTSE 100 (-2.38%) were heading south rapidly, at the point of near capitulation.
Friday also, the Asia-Pacific equity markets were losers except for Shanghai (+1.54% to 2261.5). The losses were large, but not as excessive as we have seen in the recent past: Australia (-1.32% to 3353.0), Nikkei 225 (-1.87% to 7416.4), Hong Kong (-2.49% to 12699.2), and India’s Sensex BSE 30 (-2.21% to 8843.2).
As for the Cara 100, the winners included SU +7.2%, and the Russian’s VIP +5.1% and MBT +4.8%. VIP has had three straight very strong sessions. The losers were led by SLW -11.1%, WHR -9.6%, CCJ -8.0%, KGC -7.2% and DELL -6.1%.
US Treasuries were soft again as yields lifted. The $USB long bond dropped -1.86% to 126.27 and is still weak Friday morning.
Thursday, the US Dollar weakened ($USD -0.48% to 87.58) while the Euro gained +1.05% to 126.75. Earlier this morning at 7:38am ET, the $USD was at 88.015 and the Euro at 126.23. Crude Oil for April was at 39.06. The DJIA futures were at 7331, indicating a very weak open.
Precious metal spot prices were strong at 8:38am (vs 7:38am ET and Thursday at 7:39am): 994.10 (991.18) (980.15); 213 (212) (213); 1087.5 (1088.5) (1074); 14.51 (14.35) (14.25), for gold, palladium, platinum and silver, respectively.