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Another test for U.S. stocks: Will the S&P 500 hold 1040?
05/25/2010 11:41 am EST
After an initial self-off the Standard & Poor’s 500 Stock Index bounced—slightly—off support at 1040. You’ll remember from last week’s post http://jubakpicks.com/2010/05/20/have-things-stopped-getting-worse-faster-sorry-thats-as-positive-as-i-can-get-today/ that 1040-1045 marks the February low.
If U.S. stocks can hold above that level, then what we’ve got right now is a painful but normal correction to the big rally that began in March 2009. If stocks sink below that level, then investors are looking at something else—and no telling how serious that something else might be.
Considering what went on in Asian and European stock markets leading into the opening of U.S. markets it’s surprising—and I’ll admit heartening—that U.S. stocks held at 1040 this morning. As of this 11:30 ET post the S&P 500 was at 1052.
Asian markets closed down big on worries about the euro debt crisis, slowing global economic growth, and rising tensions on the Korean Peninsula. Rumors this morning had North Korean leader Kim Jong Il telling his military to prepare for war. (The news sources I’ve looked at this morning say that as far as they can tell North Korea hasn’t mobilized its army.)
Japan’s Nikkei closed down 3.1%. Hong Kong’s Hang Seng was off 3.5%. The Shanghai Composite fell 1.9%. And India’s Sensex declined by 2.7%. Basic materials stocks led the retreat. This sector would be expected to suffer the most if growth is slowing.
European stock markets followed suit. At the 9:30 a.m. ET open for trading in New York London’s FTSE was down by 2.8% with all 102 stocks in the index lower. France’s CAC fell by 3.5%. Germany’s DAX dropped 2.9%. And Spain’s IBEX retreated by 4.5%.
In Europe basic materials stocks, energy stock (BP in London and Total in Paris) and financials led the market downward.
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