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June 13, 2012

Stocks slip as US waits for direction from Europe

From The Associated Press

NEW YORK — U.S stocks struggled to decide which way to go for much of the day Wednesday, then dropped heavily toward the end of trading. A looming election in Greece and the broader debt maelstrom in Europe provided an ominous backdrop.

The major indexes opened in the red, then drifted between small gains and losses for most of the day. But sellers took hold at midafternoon. The Dow Jones industrial average was down 100 points.

In the European debt crisis, the finance minister of Cyprus added to the undercurrent of alarm when he warned that the small island country may seek its own bailout this week.

Spain’s 10-year borrowing rate inched up to 6.71 percent from 6.67 percent.  Other countries in Europe have had to seek bailouts when their borrowing rates hit 7 percent.

European countries will lend up to $125 billion to Spain’s banks, but that has not soothed markets. Investors want more detail about the priority that the Spanish government, which will funnel the money to the banks, will have to place on the debt.

Italy, perhaps the next flashpoint in Europe’s debt crisis, had a setback of its own. Its 10-year borrowing rate rose to 6.07 percent from 6.02 percent the day before, and the country had to pay a sharply higher rate in a sale of one-year bonds.

In the Greek election, on Sunday, voters may endorse a party that wants to cancel the terms of Greece’s own bailout. That could speed Greece’s exit from the euro currency.

Greece’s elections are especially hard to read because rules there forbid polling in the two weeks before an election, said Jim McDonald, chief investment strategist at Northern Trust in Chicago.

So “in a void of real developments,” McDonald said, investors are hard-pressed to figure out how to trade in Europe.

News about the U.S. economy was hard to read. The government said that retail sales fell in both April and May. But excluding gas station sales, where prices dropped throughout those months, retail sales grew modestly in May.

The Dow Jones industrial average was near the low for the session, at 12,473 in late trading. That was still calm compared with Monday’s plunge of 143 points and Tuesday’s jump of 163 points.

The S&P 500 index was down 11 points to 1,313, and the Nasdaq was down 27 at 2,816.

Richard Ross, global technical strategist at Auerbach Grayson in New York, said he’s still bullish on U.S. stocks. He thinks their decline throughout May, perhaps a necessary correction, means they’re ready to charge ahead.

The market’s inability to make up its mind this week, he said, is a result of investors trading on news headlines rather than examining the fundamentals of individual stocks.

“The sovereign debt crisis, the Greek elections, the Egyptian elections — if you are basing an investment strategy around these headlines, you will be paralyzed,” Ross said.

The interest rate on the U.S. 10-year Treasury note fell to 1.63 from 1.66 percent. Investors moved money into one of the few places where they think it will be safe, with the U.S. government.

Big movers included JPMorgan Chase, which rose 63 cents to $34.41 after CEO Jamie Dimon testified to Congress about the bank’s surprise $2 billion trading loss. Dell jumped 37 cents to $12.34 after the computer maker said it would begin paying its first shareholder dividend. Cigarette maker Philip Morris International rose $1 to $86.01 after announcing it will buy back more of its own stock.

Scotts Miracle-Gro, which makes lawn-care products, fell $2.55 to $40.50 after issuing weak forecasts for profit and revenue. Cobalt International Energy fell $1.41 to $21.63 after announcing it will abandon a Gulf of Mexico well that hasn’t yielded any commercial hydrocarbons. Nike fell $6.04 to $101.56.

 

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