U.S. Stocks Plummet Amidst Record-Low New-Home Sales and European Debt Worries

Strategic Insights -

U.S. stocks suffered significant losses this week, with the S&P 500 Index declining for four consecutive days after new-home sales reached a record low. The downturn was exacerbated by concerns over European indebtedness and the Federal Reserve's warning that it may harm American growth. The market received a brief respite when Congress scaled back a financial-reform bill, sending bank stocks soaring.

Key Takeaways:

  • The S&P 500 Index dropped 3.7% this week, its largest decline since May 21, to close at 1,076.76.
  • The Dow Jones Industrial Average fell 2.9% to 10,143.81, with Microsoft, Chevron, and General Electric leading the losses with drops exceeding 6.5% this week.
  • Anadarko Petroleum Corp. led the energy sector to a 2.4% decline, while BP Plc plummeted 15% following the Obama administration's announcement to appeal a deepwater drilling ruling.
  • New-home sales in May slumped to an annual pace of 300,000, the lowest recorded, leaving investors and analysts concerned about the housing market's recovery.
  • The decline in new and existing home sales has raised fears about the market's dependence on government support and the potential for a prolonged economic downturn.
  • The Federal Reserve's Open Market Committee noted that financial conditions have become less supportive of economic growth, citing the Greek government's debt woes and the resulting surge in credit default swaps.

Statistics:

  • New-home sales in May reached an annual pace of 300,000.
  • The S&P 500 Index declined 3.7% this week to close at 1,076.76.
  • The Dow Jones Industrial Average fell 2.9% to 10,143.81.
  • Anandarko Petroleum Corp.'s share price dropped by 15%.
  • Credit default swaps protecting against Greek government debt default surged to a record high.
  • The Federal Reserve's Open Market Committee noted that financial conditions have become less supportive of economic growth.

Sources:

  • U.S. Commerce Department
  • Federal Reserve Open Market Committee
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