Wall Street Declines for the Second Consecutive Day

On Wall Street, leading indices sharply fell on Friday for the second consecutive day, primarily due to a drop in stock prices in the financial sector after the U.S. Senate passed a bill limiting credit card fees, as well as fears that financial problems in the Eurozone could weaken its economy.

The Dow Jones index fell by 162 points, or 1.51 percent, to 10,620 points, while the S&P 500 plummeted 1.88 percent to 1,135 points, and the Nasdaq index dropped 1.98 percent to 2,346 points. The financial sector was under the most pressure yesterday as the Senate approved the bill limiting fees on credit and debit card transactions. The S&P 500 financial sector index weakened by 2.7 percent, with card issuer stock prices falling the most. Visa’s stock dropped nearly 10 percent, while MasterCard’s fell by 8.6 percent. The retail sector also faced pressure, with the S&P index for that sector declining by 1.2 percent. Nordstrom’s stock fell by 3.7 percent, and J.C. Penney’s by 2.2 percent, after both companies issued weaker-than-expected forecasts for future business.

Investors were not encouraged by the data showing that retail sales in the U.S. rose by another 0.4 percent in April, following a 2.1 percent jump in March. The S&P energy sector index also fell sharply by 2 percent as oil prices dropped by $2.8 to $71.60 per barrel, the lowest level since February, due to concerns that the European debt crisis could reduce demand for energy. Investors fear that cuts in budget spending in financially weakened Eurozone members, such as Greece, Spain, and Portugal, will slow the recovery of the economy in that bloc, which would negatively impact the global economy. As a result, stock prices on European exchanges fell by more than 3 percent yesterday, while the euro exchange rate plunged to just $1.2355, the lowest level in 19 months.

"The drop in the euro has crashed stock prices. It is clear that currency traders believe that the EU’s plan to stabilize the Eurozone and the austerity measures of individual member states will not be sufficient and will lead to a weakening of the European economy," says Uri Landesman, president of Platinum Partners. Earlier in the week, the agreement among European Union leaders on a €750 billion rescue plan for the European currency sparked a surge in stock prices on Wall Street by more than 4 percent. However, the euphoria has subsided, and the Dow Jones index’s gain for the entire week amounted to 2.3 percent. The S&P 500 rose by 2.2 percent last week, while the Nasdaq index increased by 3.6 percent. This is the largest weekly jump for these indices in the last 10 weeks. On European exchanges, stock prices sharply fell yesterday. The London FTSE dropped by 3.11 percent to 5,262 points, while the Frankfurt DAX plummeted by 3.12 percent to 6,056 points, and the Paris CAC fell by 4.59 percent to 3,560 points. (H)