What is the effect of European debt crisis on the American stocks?

This is not the first time that the European debt crisis has been creating negativity all around in the financial markets. Moreover, with the warning that Moody’s Investors Service is going to review the credit ratings of the European nations, the optimism of the investors seemed to turn over into a new fear. Thus, the stocks and all of the other kinds of risky assets took a plunge last week. So, if you had been thinking of investing your money in stocks so as to earn extra dollars and pay off debt, you should consider the stock markets all around the world and their performances.

European debt crisis and stocks

The Fitch Ratings were of the opinion that the European zone is again going to face an economic downturn as it is still wrestling hard with the sovereign debt crisis. The euro thus hit almost a 10 week low and has plunged to nearly 2 cents. The yields on the Italian bonds rose as the investors almost annoyed about the debt burden of the nation. Thus, the European stocks fell and the treasury yields too fell as almost all of the investors shifted their money into the U.S. government debt.

The US stock markets too have been on the edge throughout the last week in the anticipation of a summit deal that they expected would put a hold to the debt crisis of the euro zone, and then make the way easier for the greater action by ECB so that they can hold down the bond yields. However, the advancements from the European simply resulted in disappointment.

Thus, as a result, the U.S. stocks too fell broadly. There have been declines for all of the 30 stocks with regards to the Dow Jones industrial average and all of the other 10 industry groups in case of the Standard & Poor’s 500 index.

The Dow too fell by 222 points, which is 1.8 percent. Thus, it resulted to 11,962 shortly in the last week. On the other hand, the Intel Corp. fell by 5.4 percent immediately when the chipmaker affirmed that there was a shortage of the hard drives and that this is going to limit the shipments, thereby pushing over the revenue outlook of the fourth-quarter far below than what the Wall Street had actually expected.

The Standard & Poor’s 500 index too have fallen by 26 points which is by 2.1 percent, and it amounted to 1,229. On the other hand, the Nasdaq composite index dropped by around 51 points, which is 1.9 percent, and so it amounted to 2,595.

Europe still now is in a volatile stage and this is having a negative effect on the US stock markets too.

Brook Peterson

Authior Bio: BP is a regular writer for various finance related Communities including Debt Consolidation Care (http://www.debtconsolidationcare.com/). She is a PG degree holder in Marketing and Finance and right now working in a reputed bank as a relationship manager. She is well equipped to write articles on debt consolidation , debt settlement, frugality, savings, economies of states etc.

Market Timing – Weekly Stock Market Strategy – August 2011

Weekly stock market strategy updates that went out to subscribers during August 2011. To receive current weekly update sent to your email, click on the FREE TRIAL link at the top of the page.

Weekly Market Update 08/07/11

The big news of the week came after the market closed down 5-8% for the week. Standard and Poors downgraded US debt to AA+ from AAA. I am not sure how the stock market will react on Monday. It will probably have some effect on the bond markets, as portfolios may need to be adjusted to satisfy charter requirement for bonds held in various investment grade products. The Employment Situation was also released Friday. Don’t be fooled by the employment rate dropping from 9.2% to 9.1%. The majority of the change can be attributed to a reduction in the workforce, in other words the unemployed who stopped looking for work. This week I will be watching the results of the FOMC meeting and Retail Sales.

Has the correction in the stock market of 10% given the Fed just cause to announce QE3? I think that announcement is getting very close. If we see any more downside in the market I would not be surprised to hear something by the end of the week. I wonder if the S&P downgrade has in anyway tide the hands of the Fed. My gut says “No.”

The market was so bad this week both the intermediate and long-term call have turned bearish. I am glad that our only exposure over the last few weeks has been the 25% we have in the Quarterly ETF Portfolio. I think we could regain some of the losses by the end of the quarter. As I write this Isreal’s benchmark stock index closed down 6.2% and its sounds like we may see more issues with the European debt crisis. Monday could be a very volatile day. We will need to see the markets calm down before looking to enter the market.

Weekly Market Update 08/14/11

There are a few points of interest from an economic standpoint. Tuesday the Fed announced they would continue their ZIRP, Zero Interest Rate Policy, for another two years. Jobless claims finally came in under 400k at 395k. This could still be revised higher. The other big shocker this week was Consumer Sentiment. This survey is directly related to consumer spending. The number was 54.9, which is 9 points lower than last month’s number. Also interesting is this months number was lower than any released during the meltdown of 2008, and is very near the lowest number ever released. Also any numbers this low occurred during an official recession. An official recession is 2 or more quarters of negative GDP growth. GDP for the first quarter was .4% positive but barely. Second quarter GDP came in at positive 1.3% but this can still be revised. I think it is possible we could see negative GDP for the second half of the year.

The volatility in the markets this past week is unprecedented. Even when compared to the sell-off during 2008. One positive take from the markets is that sentiment has gotten so bad it is likely we have put in at least a short term low. We could see a retest of these levels in the coming months. I am waiting for volatility to subside some before looking for a safe entry. Europe has banned the short selling of financial stocks. If you remember we tried that here in the U.S. during the meltdown and it did not work to well. In fact financial stock fell more than 50% after the ban was put in place. This could create some additional volatility this week.

Weekly Market Update 08/21/11

This weeks economic reports did not do anything that would suggest we are not in a recession. The Philly Fed Survey dropped from 3.2 to -30.7. This is a level again, only seen when we are in a recession. The Producer Price Index had a year over year change of 7.2%. And Jobless claims was again back above 400,000.

The price action in the indexes looks as though we are at least testing the recent lows in the stock indices. Last week saw some incredibly bad sentiment readings. The type that are usually associated with market bottoms. So this brings me to the conclusion that we are at a inflection point. If we do not bounce from close to this level we could see the decline continues another 10% minimum. Since I like to lean on the conservative side I would prefer to wait on a buy signal to occur before I get back in. I will keep you posted if anything changes.

Weekly Market Update 08/28/11

We got some mixed signals from this weeks economic reports. First Durable Goods sales were up 4.0% when they were expected to rise a more modest 2.0%. Then Jobless Claims came in at 417,000 and last weeks number was revised to 412,000. I found it quite comical that there were a few pundits that became quite giddy over one positive economic report. We will need to see several months of positive economic reports before we can start getting exited about business activity. Fed Chairman Bernanke failed to announce QE3 at his speech from Jackson Hole, Wyoming as anticipated. Now it is speculated that it will take another real catastrophe for the Fed to do anymore quantitative easing.

I really don’t like saying this but the price action over the last two weeks appears to be forming a flag. In technical analysis a flag formation on the charts is considered a continuation pattern. Meaning it is suggesting a continuation of the recent downtrend. We will need to see a continuation of Fridays price action and see some closes on the SPY over 120 before we can start to negate this bearish pattern. Now is not the time to blindly start buying into the market. We need to see some stabilization then some bullish signals before we can consider getting long this market.