Losses in energy and materials companies led a widespread rout on the stock market. The Dow started sinking after 10 a.m., when the Philadelphia branch of the Federal Reserve reported a sharp contraction in manufacturing in the Northeast. The losses accelerated throughout the day. "The news has been horrible out there," said Uri Landesman, president of Platinum Partners. "The U.S. economy is slowing down. And China's growth is definitely under question." The bad news kept piling up as the day went on. Mining and other companies that made basic materials fell hard after prices for commodities such as copper and oil dropped. Goldman Sachs analysts advised their clients to bet that stocks would fall, and speculation swirled that Moody's would cut the credit ratings of 17 banks. The Dow lost 250.82 points to close at 12,573.57, a drop of 2 percent. Alcoa lost 37 cents to $8.55. A new report that manufacturing slowed in China was troubling since that country's economy has helped drive global economic growth over the past four years. China is a major importer of copper and other basic materials. The Standard & Poor's 500 index lost 30.18 points to 1,325.51, a decline of 2.2 percent. The Nasdaq composite fell 71.36 points, 2.4 percent, to 2,859.09. All three indexes lost their gains for the week. - Canadian Business.
Meanwhile, credit ratings agency Moody’s could downgrade the debt ratings of as many as 15 global investment banks after the closing bell today, a move that would cost the banks billions of dollars in extra collateral.
In February, Moody’s announced it would review the ratings of 17 global investment banks and has already downgraded Macquarie and Nomura. In the U.S., the companies that are most likely to be affected by today’s action: Bank of America, Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley. Royal Bank of Canada and nine European banks, including Deutsche Bank, BNP Paribas and Credit Suisse are also on the list. The current credit actions are part of a comprehensive review of the overall global banking system by Moody’s. In the middle of last month Moody’s downgraded Italian, Spanish, German and Austrian bank credit ratings. The U.S. banks with global capital markets capabilities have had an open dialogue with the ratings company, in an effort to soften the severity of the downgrades. This afternoon’s anticipated announcement could affect the long-term debt ratings of the bank-holding companies of five of the biggest U.S. banks — only Wells Fargo is not on the list. Moody’s is also looking at the short-term debt of the five bank-holding companies and the main bank operating subsidiaries of all except JPMorgan. The company that has the most to lose: Morgan Stanley. Moody’s is contemplating cutting Morgan Stanley’s senior long term debt rating three notches to Baa2, or just two notches above “junk”. That could put its credit rating on a level with Bank of America’s and Citigroup’s — if its debt is downgraded as expected. - CNBC.
Spain's banks would need 51-62 billion euros ($64-78 billion) in extra capital to weather a serious downturn in the economy, less than a 100-billion-euro aid package offered by the euro zone, independent audits showed on Thursday.
The Spanish government will use the reports by consultancies Roland Berger and Oliver Wyman to determine how much aid it will take to recapitalize its ailing lenders. Spain said it will make a formal request in the next few days but details on how much each bank will need won't be known until September, leaving analysts with mixed feelings about the capacity of the audit to restore confidence in a sector shut out of international markets. Doubts about the economy and the banks have moved Spain to the center of a long-running euro zone debt crisis, forcing the Treasury to pay its highest yield since 1997 to sell less than a billion euros of 5-year debt on Thursday. - Reuters.