NYSE Invokes ‘Rule 48’ To Control Sell-off
Traders Across The Globe Rushed Out Of Equity Markets
By Dell Hill
Publishers Note: This blog does not give investment advice. Consult your broker.
All eyes are on the New York Stock Exchange today as worries over the debt crisis in Europe has investors making major changes to their portfolios.
across the globe rushed out of equity markets and piled into safe
havens after a move by Greece put a plan forged by European leaders to
avert the heightening debt crisis into question.
As of 10:10 a.m. ET, the Dow Jones Industrial Average slid 255 points, or 2.1%, to 11,698, the S&P 500 dropped 28.2 points, or 2.3%, to 1,225 and the Nasdaq Composite fell 78.6 points, or 2.9%, to 2,606.
session on Tuesday was off to a volatile start with the VIX spiking
17.7%. Indeed, the New York Stock Exchange invoked "Rule 48," which is
designed to smooth the opening of trading on particularly tumultuous
blue chips plunged 5.8%, while the euro was off 1.6% against the U.S.
dollar. Euro zone banks, seen to have a particularly large exposure to
sovereign debt, took a strong beating.
three biggest banks, Societe Generale, BNP Paribas and Credit Agricole,
and Germany's Deutsche Bank were all off more than 10% in afternoon
Meanwhile U.S. investment bank Morgan Stanley (MS: 16.34, -1.30, -7.37%), which has been the subject of concern over its European debt holdings, fell as much as 10%.
on U.S. government bonds fell as traders raced into the perceived
safe-haven assets. The benchmark 10-year Treasury note yielded 2.006%
markets capped the best month in years on Monday. However, the last
two sessions have represented a stark contrast as fears over the
European debt crisis have once again crept back to the forefront, with
the blue chips shedding 500 points in two sessions alone.
Greece Move May Put EU Plan in Jeopardy
Prime Minister George Papandreou unexpectedly called for a referendum
of the country's bailout package after the closing bell on Monday.
Citizens would reportedly be asked to either approve or deny the
bailout from various international lenders, which the beleaguered nation
needs to stave off a default that analysts say could pressure much
bigger European economies, like Italy.
Greek public has vehemently, and sometimes violently, protested the
austerity measures lenders have pushed for to cut the country's
tremendous public debt load. Indeed, a recent poll shows more than half
of Greek voters are against the measures, according to The Wall Street Journal.
latest developments increase the uncertainty around the euro area's
response to the crisis," analysts at Nomura wrote in a note to clients.
"If the referendum fails it might have wider repercussions, and not only
in Greece given the general discontent at the peripheral austerity
leaders, who are already facing strong political criticism for using
public funds to support Greece, may be faced with a difficult decision
if the referendum fails. Analysts say they would have to either ease
the bailout terms, or risk an almost certain default that would threaten
the entire currency bloc, and potentially global economies.
the same time, if the terms of the bailout were lightened, it may
signal to other countries seeking bailouts that such measures provide
leverage in negotiations.
European leaders remained optimistic following Greece's move: "We fully
trust that Greece will honour the commitments undertaken in relation to
the euro area and the international community," the European Council
and European Commission said in a joint statement.
Global Manufacturing Data Miss Expectations
Also concerning to the markets are fresh data showing the pace of manufacturing expansion in the U.S. and China -- two of the world's biggest economies -- unexpectedly slowed down to a crawl in October from September.
Institute for Supply Management Manufacturing PMI gauge fell to 50.8 in
October from 51.6 in September and missing expectations of 52. Readings
above 50 point to expansion, while those below indicate contraction.
Meanwhile, construction spending rose 0.2% in September from August, slower than the 0.3% pace economists' had anticipated.
On the corporate front, pharmaceutical giant Pfizer (PFE: 19.53, +0.27, +1.40%) posted quarterly earning and sales that came in well higher than analysts' estimates.
Market participants were also paying close attention to the unfolding MF Global (MF:
1.20, -0.23, -16.08%) situation. The once powerful derivatives player
filed for Chapter 11 bankruptcy protection on Monday after a soured bet
on European sovereign debt sent investors and customers fleeing,
according to several media reports. A last-ditch plan to sell the
company fell through in the final hours after discrepancies were found
in the New York-based companies books, with regard to customer money,
according to a report by The Wall Street Journal.
and metals futures were sharply lower amid concerns over Chinese
manufacturing, a rallying dollar and tracking broad selling in equity
markets. The benchmark U.S crude oil contract sunk $2.48, or 2.6%, to
$90.73 a barrel. Wholesale RBOB gasoline fell 4 cents, or 1.5%, to
$2.64 a gallon.
Gold slid $21.20, or 1.2%, to $1,704 a troy ounce.
European blue chips plunged 5.8% to 2,248, the English FTSE 100 slid 3.5% to 5,349 and the German DAX plummeted 5.8% to 5,785.
In Asia, the Japanese Nikkei 225 slid 1.7% and the Chinese Hang Seng dipped 2.5% to 19,370.