Stocks Slump on Financial Issues

Last Tuesday, stocks tumbled and blue chips lead the way while a slew of financial companies warned about the ongoing impact brought about by credit market problems. This overshadowed any relief about lower oil prices that may have been present.

Lower Numbers

With the average financial components leading the sell off, the Dow Jones industrial average (INDU) lost 1.2%. The Nasdaq composite (COMP) dropped by 0.4%. And lastly, the broader Standard & Poor’s 500 (SPX) index fell by 1.2%.

With the exception of Nasdaq composite making a few forays into positive territory, the lower oil prices caused major gauges to be in negative terriroty for most of the day.

Portfolio manager of Independence Investments, John Forelli, says that as always, financial issues are getting hit today on worries about the credit market.

Fiorelli adds that struggles being experienced between concerns about the financial sector and as well as the relief that some inflationary pressures are significantly dwindling, will be evidently present from day-to-day for investors in the near term.

He further states that there were twin worries of the economy slowing down and inflation to be accelerating, all up until oil prices started coming down just a few weeks ago. And that inflation worries are currently diminishing, but nevertheless, they are still struggling with the growth side.

Fiorelli says that in the next few weeks and upcoming months, concerns such as those previously mentioned will continue to limit stock moves.

In mid-July, crude prices have lost over 20% since peaking above $147 a barrel. This is something that has helped stocks to recover since hitting 2008 lows in mid-July.

Tom Sowanick, chief investment officer at ClearBrook Financial LLC, says that although there is currently a good probability that stocks put in a so-called bottom in mid-July, the negative market psychology is still going to continue to keep a lot o investors on the sidelines.

Sowanick adds that the investors are going to have to go through some sort of a retraining cycle since they have been trained to be fearful in the last 12 months. He says that the investors should take note that the momentum buyers are coming back and they should be convinced that the trend is evidently shifting.

Applied Materials (AMAT, Fortune 500) reported after the close that due to the tough industry environment, reported sales from a year ago tumbled. But nevertheless, the shares gained 3% in extended-hours trading; which show that the results edged out the estimates made by the analysts.

Other Financial Matters

JPMorgan Chase (JPM, Fortune 500) said in a regulatory filing that in the third quarter versus the second quarter, trading conditions have deteriorated. And that in credit market losses on the quarter, it has wrotten down over $1.5 billion.

After the attorney general office declaring that its investigation of the sale of such securities will include the firm, Morgan Stanley (MS, Fortune 500) mentioned let Monday that it will repurchase $4.5 billion in auction-rate securities.

Following the news, he attorney general’s office said that the repurchase plan will not stop the investigation from continuing. And in addition, Morgan’s debt rating was cut by Moody’s.