Egyptians demonstrators shout slogans next to a poster of their President Hosni Mubarak in Cairo. Photographer: Marco Longari/AFP/Getty Images
Jan. 28 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today.
Stocks worldwide plunged the most since November, crude oil posted the biggest jump since 2009 and the dollar rose versus the euro after protesters posed the biggest challenge to Egyptian President Hosni Mubarak’s 30-year rule. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
Stocks worldwide plunged the most
since November, crude oil posted the biggest jump since 2009 and
the dollar rose versus the euro after protesters posed the
biggest challenge to Egyptian President Hosni Mubarak’s 30-year
rule. Egypt’s dollar bonds sank, pushing yields to a record.
The MSCI All-Country World Index of stocks in 45 countries
lost 1.4 percent at 4:59 p.m. New York time. The Dow Jones
Industrial Average fell 1.4 percent to 11,823.70, preventing
its longest weekly winning streak since 1995. Oil futures
increased 4.3 percent to $89.34. The dollar appreciated 0.9
percent to $1.3611. Yields on Egypt bonds due in 2020 surged
22 basis points to 6.51 percent. Gold futures jumped 1.7
percent, the most in 12 weeks.
Egyptian protesters clashed with police throughout the
country and into the night, defying a curfew and setting fire to
buildings. Mubarak imposed the curfew after tens of thousands of
marchers chanted “liberty” and “change.” After U.S. markets
closed, Mubarak said he asked the government to resign. The
demonstrations offset data showing that growth in U.S. gross
domestic product accelerated in the fourth quarter.
“The unrest in Egypt has people concerned,” said Mark Bronzo, who helps manage over $25 billion at Irvington, New
York-based Security Global Investors. “When it comes to the
Middle East, there’s worries the unrest is going to spread. It
has negative implications for the world.”
Beating Estimates
The Dow had to close above 11,871.84 to post a ninth
straight weekly gain. Before today, it had risen 1 percent this
week, supported by higher-than-estimated earnings. More than 74
percent of the 183 companies in the Standard & Poor’s 500 Index
that reported quarterly earnings since Jan. 10 beat the average
analyst projection, according to data compiled by Bloomberg.
Egypt overshadowed evidence the U.S. economy, the world’s
biggest, is improving. GDP expanded at a 3.2 percent annual pace
in the fourth quarter, up from 2.6 percent during the prior
three months, as consumer spending climbed by the most in more
than four years.
Investors who pushed the Dow above 12,000 for the first
time since 2008 this week may be getting ahead of themselves. It
surpassed that level the past two days. More U.S. stocks are
trading above their 200-day average price than any time since
April, when the Dow began a 14 percent slump. The cost to insure
against S&P 500 losses with options has fallen to an almost
three-year low.
Too Optimistic
The Dow may have surged too fast following its more than
2,000-point jump since August even as analysts forecast a third
straight year of profit growth for the S&P 500, said James
Investment Research Inc.’s Tom Mangan and BB&T Wealth
Management’s Walter “Bucky” Hellwig. Mangan and BGC Partners
LP’s Michael Purves see signs investors are too optimistic about
the next few months.
Shares of Ford Motor Co. plunged 13 percent as the
automaker said profit slid 79 percent. Amazon.com Inc. declined
7.2 percent after saying earnings may miss analysts’
projections. The Chicago Board Options Exchange Volatility
Index, which measures the cost of insurance against losses in
U.S. stocks, jumped 24 percent, the most since May.
The NYSE Arca Airline Index lost 4.3 percent after oil
jumped. Any disruption to Middle East oil supplies “could
actually bring real harm,” U.S. Energy Secretary Steven Chu
said on a conference call.
The Suez Canal, which connects the Mediterranean and Red
Seas, is located in Egypt. One million to 1.6 million barrels a
day of oil and refined products moved north to Europe and other
developed economies in 2008 and 2009, according to the Energy
Information Administration, the statistical arm of the U.S.
Energy Department.
Windows Revenue
Microsoft Corp. had the biggest drop in the Dow, retreating
3.9 percent, after a shortfall in Windows revenue raised
concerns about demand. The slump drove the Nasdaq Composite
Index to a 2.5 percent decline, the most since August. The S&P
500 fell 1.8 percent, the biggest decrease since Aug. 11.
The dollar and Swiss franc advanced the most in three weeks
against the euro as a day of clashes in Egypt between police and
protesters spurred demand for the safety of the currencies.
Egypt’s pound traded at an almost six-year low against the
American currency. Fitch Ratings revised the Middle East
nation’s outlook to negative.
The Swiss franc advanced 1.4 percent to 1.2806 per euro.
Egypt’s currency traded at 5.8575 per dollar after touching the
weakest level since January 2005 yesterday. Turkey’s lira sank
as much as 2.1 percent to 1.6171 per dollar, falling along with
the currencies of other nations near Egypt. Israel’s shekel
declined as much as 1.8 percent to 3.7141.
Treasuries rose, pushing two-year yields to a seven-week
low of 0.54 percent. Yields on 30-year bonds had reached a nine-
month high of 4.64 percent following the report showing U.S. GDP
growth accelerated.
Gold futures for April delivery rose 1.7 percent to
$1,341.70 an ounce, the biggest gain since Nov. 4. The metal
climbed to a record $1,432.50 on Dec. 7.
To contact the reporters on this story:
Rita Nazareth in New York at
rnazareth@bloomberg.net
Inyoung Hwang in New York at
ihwang7@bloomberg.net.
To contact the editor responsible for this story:
Nick Baker at nbaker7@bloomberg.net.