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Wall Street closed well off its worst level of the day on Black Friday but still suffered its worst session of November amid fears about the fallout from Dubai World’s $60 billion in debt and a dollar-induced dive for commodities.
Today's Markets
The Dow Jones Industrial Average fell 154.48 points, or 1.48%, to 10309.92, the S&P 500 lost 19.14 points, or 1.72%, to 1091.49 and the Nasdaq Composite sank 37.61 points, or 1.73%, to 2138.44.The FOX 50 dropped 12.15 points, or 1.48%, to 809.81.
Overshadowing mixed early reports about Black Friday, the U.S. markets had their first chance to react to the news that state-owned investment company Dubai World will postpone payment on tens of billions of dollars-worth of debt for six months. The U.S. markets were closed for Thanksgiving a day ago and also closed early Friday.
While the losses on Wall Street were nothing to sneeze at, they were less than one-half what Europe and Asia suffered a day ago on the Dubai news. Friday’s selloff was driven by commodity-related stocks and the financials, which lost ground on worries about their exposure to Dubai.
“People are clearly going to be looking to reduce risk in all asset classes as a result of the uncertainty being raised out of the situation in Dubai,” said Michael James, senior equities trader at Wedbush Morgan Securities. “The fear is a combination of the unknown and that this mushrooms into other problems in the financial world. It’s going to result in a sell-first mentality across the board today.”
Some traders found reason for hope since the Dow had been down as much as 233 points before rallying back as the dollar pared its gains. At one point the index was down less than 100 points.
“I think this is a little anomaly. People were looking for a reason to sell off stocks,” NYSE trader Jason Weisberg of Seaport Securities told FOX Business.
All 30 blue-chip stocks closed in the red, led by Bank of America (BAC), Caterpillar (CAT) and Alcoa (AA).The Dow, which had its three-week win streak snapped, suffered its steepest one-day decline since diving 250 points on Oct. 30.
Friday's NYSE floor trading volume was slightly heavier than the typical Black Friday but still marked the lowest since Dec. 2008.
Fears about the implications of Dubai defaulting on its estimated $60 billion in debt weighed on banks like HSBC (HBC) and forced a horde of cash to flee to the relative safety of the U.S. dollar, which soared as much as 1% before retreating.
As the U.S. dollar's rally lost momentum, crude oil, gold and stocks like BHP Billiton (BHP) and U.S. Steel (X) trimmed their losses. Even though it’s a long-term positive to have a stronger dollar, the tumbling greenback has proved to be a bullish catalyst over the past several months by making U.S. goods cheaper overseas and lifting commodities.
Gold, which had been down more than $50 earlier, was down $12.80 a troy ounce, or 1.08%, to $1174.20. Friday marked gold's first decline in 10 sessions. Oil also bounced off its session lows of $72.39, sinking $1.91 a barrel, or 2.45%, to settle at $76.05.
Reflecting the concern about bank exposure to Dubai, the financial sector sank more than 2%. European banks like HSBC, Barclays (BCS) and Royal Bank of Scotland (RBS) are believed to have more exposure to Dubai than U.S. banks.
While Dubai World had been struggling for several months after overextending itself during the credit boom, it had been expected that it would receive a bailout from its government or possibly Abu Dubai. The Dubai debt repayment delay highlights the concerns around the world about the commercial real estate market and underscores the fragility of the financial system in the wake of the worst credit crisis since the Great Depression.
Meanwhile, the S&P retail sector slid more than 1.5% amid mixed reports on Black Friday, which traditionally is the kick off to the all-important holiday shopping season. Department store operator Macy's (M) was particularly weak after CEO Terry Lundgren told Reuters the early signs are good but that he doesn't "think necessarily that customers are going to spend more than last year."
Corporate Movers
ING (ING) may wish it chose a different day to raise cash as the Dutch bank’s $11.2 billion rights issue came in at a 52% discount amid a plunge in global markets sparked by Dubai’s debt crisis. The Amsterdam-based bank issued 1.768 billion new shares at 4.24 euros each, compared to its closing price of 8.916 euros on Thursday. ING’s shares slumped to $10.12.
Global Markets
In the U.K., the FTSE 100 gained 0.99% to 5245.73, France's CAC 40 rose 0.21% to 3721.45 and Germany's DAX advanced 0.40% to 5685.61.
In Asia, Tokyo's Nikkei 225 plunged 3.2% to 9081.52, the Hang Seng plummeted 4.8% to 21,134.50 and China's Shanghai Composite fell 2.36% to 3096.26.
Stocks decline in early morning tradingWall Street’s Comeback Comes Up Short
