US markets Today – 16 May 2010

The US markets ended lower as cautious comments from Cisco CEO John Chambers rattled sentiment.

Financials were among the biggest decliners following news that the New York Attorney General was probing eight banks to see if they duped the ratings agencies about the quality of the securities they were offering. The eight banks are: Goldman Sachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Crédit Agricole and Merrill Lynch, which is now owned by Bank of America.

Adding to the pressure on the market, initial claims for unemployment benefits fell slightly to 444,000, the fourth straight decline, but the prior week was revised higher.

The CBOE Volatility Index rose slightly to around 26.

The Dow Jones Industrial Average closed at 10,782.95, down 113.96 points or 1.05%. The tech heavy Nasdaq Composite ended at 2,394.36, up down 30.66 points or 1.26% and the S&P 500 Index fell 14.24 points or 1.22% to 1,157.43.

Cisco was the biggest Dow decliner after CEO John Chambers said that there is still reason for caution, given the weak job market. He however did some damage control saying his cautious remarks were over interpreted.

The Euro slipped to a 14-month low against the dollar on fears that harsh fiscal tightening in Europe would dampen an already-weak recovery

Major European markets ended higher but the (Portugal, Italy, Ireland, Greece and Spain) PIIGS markets continued to be under pressure. Meanwhile Portugal agreed to tough new austerity measures.

Jose Socrates, Prime Minister, Portugal said, “This measure that we have now approved is crucial and necessary for Portugal’s credibility and confidence and to ensure that we can finance the Portuguese economy. I am convinced that the Portuguese people will understand that the govt has been dealing with a situation that is the second phase of the biggest economic crisis that the world has faced in the last 100 years.

Commodities were lower with the CRB commodity index declining 0.4%.

June Crude Oil futures surged mid-session to hit a high at USD 76.45 a barrel before paring all of its gains and declining 1.7% to USD 74.40 per barrel.

Copper led gains in the base metal space after new austerity steps taken by Portugal and Spain to tackle their debt aided sentiment and encouraged investors to continue to re-establish positions.

Precious metals were hampered by dollar’s strength. Gold lost more than a percent to USD 1229.20 per ounce.

Indian ADRs ended mostly in red on Thursday. In Telecom space, Tata Communication was down 2.26% at $ 11.23 and MTNL was down 1% at $ 2.97. In Banking space, HDFC Bank was down 1.98% at $ 148.79 and ICICI Bank was down 0.68% at $ 40.84.

In IT space, Wipro was down 1.3% at $ 21.99 while Infosys was up 0.2% at $ 59.65, Satyam Computers was up 0.38% at $ 5.26 and Patni Computers was up 1.93% at $ 27.

In other sectors, Sterlite Industries was down 2.32% at $ 15.98, Dr Reddy’s Labs was down 1.76% at $ 27.88 and Tata Motors was down 0.93% at $ 19.24.

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