US stocks mixed after week of Greek drama
NEW YORK – US stocks were a mixed bag this week, first rallying and then tumbling back down as investors were transfixed by the high-stakes drama surrounding the Greek debt crisis.
The Dow Jones Industrial Average, representing 30 blue-chip stocks, was down 0.58 percent for the week, closing at 11,934.58 on Friday. In all, the Dow has fallen around seven percent since April.
The broader Standard & Poor’s 500 slid 0.24 percent to end the week at 1,268.45. But the tech-heavy Nasdaq Composite rose, climbing 1.39 percent to close at 2,652.89.
“It is difficult to take comfort in the main issues: the Greek crisis, the slowing of the economy, the US budget talks,” said analyst Gregori Volokhine, president of Meeschaert Capital Markets.
“Investors are having difficulty finding a sector in which they feel comfortable.”
Next week, all eyes will be on Athens, where the Greek parliament is set to vote on a package of deep austerity cuts designed to prevent a potentially destabilizing default.
The $40 billion package of cuts is deeply unpopular but has been demanded by the European Union and the International Monetary Fund as a precondition for further support.
US stock markets rallied Monday and Tuesday as Greek Prime Minister George Papandreou’s government survived a confidence vote.
But they fell on Friday amid warnings that ratings agencies could downgrade another EU member, Italy, jolting European banks and raising the specter of a widening eurozone debt crisis.
Closer to home, markets worried about the United States’ own looming debt problems, as Democrats and Republicans appeared no closer to a deal to raise the debt ceiling and avoid a US default by August 2.
In a sign of continued weakness in the world’s largest economy, the Federal Reserve slashed its US economic growth forecast for 2011 to a range of between 2.7 and 2.9 percent, down from its April of 3.1 to 3.3 percent.
“There are so many uncertainties with the Greek vote, the US debt ceiling [that] it’s less about the news of the day, the economic data, than the big picture,” said Marc Pado of Cantor Fitzgerald.
Next week, markets will face the conclusion of the Fed’s second round of quantitative easing, dubbed QE2, which has seen the Fed pump $600 billion into the US economy since November to aid the flagging recovery.
After a meeting of its policy-setting Federal Open Market Committee this week, the Fed confirmed that QE2 would end as scheduled by June 30, though it vowed to maintain near-zero interest rates “for an extended period.”
Federal Reserve chairman Ben Bernanke had little choice but to end QE2 and could not pursue a third round of quantitative easing, analysts from RDQ Economics said in a weekly commentary.
“Inflation has surged and so Captain Bernanke fears that a foray into QE3 risks dashing the economy on the rocks of higher inflation,” they said.
“On the other hand, the economy has slowed and so an early exit from the current ultra-accommodative policy stance risks sucking the economy into the whirlpool of an even deeper slowdown.”
Energy stocks were among the biggest losers of the week, with their values plummeting after the International Energy Agency announced a drawdown of strategic petroleum stocks to drive down soaring oil prices.
ExxonMobil was down 2.3 percent for the week, while Chevron was down 1.3 percent.
Google stock took a beating after news emerged on Thursday that the Internet search giant was being targeted in an antitrust probe. Shares in Google have dropped 2.5 percent from their closing price on Wednesday.
