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Stocks Drop Worldwide as Oil, Dollar Surge After Egypt Protests

29 January 2011 00:43 (UTC +04:00)

Baku â€“ APA. Stocks worldwide plunged the most since November, crude oil jumped and the dollar gained against the euro after protests in Egypt intensified and President Hosni Mubarak imposed a nationwide curfew, APA reports quoting â€œBloombergâ€.
Egyptâ€™s dollar bonds sank, pushing yields to a record high.
The MSCI World All-Country World Index of stocks in 45 countries lost 1.3 percent at 2:26 p.m. New York time. The Dow Jones Industrial Average fell 1.2 percent to 11,840.58, putting its longest weekly winning streak since 1995 in jeopardy. Oil futures increased 4.2 percent to $89.24. The dollar appreciated 0.9 percent to $1.3617. Yields on Egypt bonds due in 2020 surged 22 basis points to 6.51 percent and rose 86 points this week, the most since they were sold in April.
Mubarak imposed the curfew after a day of clashes between police and protesters demanding the end of his presidency. Tens of thousands of marchers chanted â€œlibertyâ€ and â€œchangeâ€ as rallies began today at points across Cairo. Officers fired tear gas to try to prevent them from reaching Tahrir Square and police trucks were hit with rocks. The demonstrations offset data showing that growth in U.S. gross domestic product accelerated in the fourth quarter.
â€œThe unrest in Egypt has people concerned,â€ said Mark Bronzo, who helps manage over $25 billion at Irvington, New York-based Security Global Investors. â€œWhen it comes to the Middle East, thereâ€™s worries the unrest is going to spread. It has negative implications for the world.â€
Beating Estimates
The Dow, which must close above 11,871.84 to post a ninth straight weekly gain, had risen 1 percent this week, supported by higher-than-estimated earnings. More than 74 percent of the 183 companies in the Standard & Poorâ€™s 500 Index that reported quarterly earnings since Jan. 10 beat the average analyst projection, according to data compiled by Bloomberg.
Investors who pushed the Dow above 12,000 for the first time since 2008 this week may be getting ahead of themselves. It surpassed that level the past two days. More U.S. stocks are trading above their 200-day average price than any time since April, when the Dow began a 14 percent slump. The cost to insure against S&P 500 losses with options has fallen to an almost three-year low.
The Dow may have surged too fast following its more than 2,000-point jump since August even as analysts forecast a third straight year of profit growth for the S&P 500, said James Investment Research Inc.â€™s Tom Mangan and BB&T Wealth Managementâ€™s Walter â€œBuckyâ€ Hellwig. Mangan and BGC Partners LPâ€™s Michael Purves see signs investors are too optimistic about the next few months.
GDP Report
The biggest challenge to Mubarakâ€™s 30-year rule overshadowed evidence the U.S. economy, the worldâ€™s biggest, is improving. GDP expanded at a 3.2 percent annual pace in the fourth quarter, up from 2.6 percent during the prior three months, as consumer spending climbed by the most in more than four years.
The Chicago Board Options Exchange Volatility Index, which measures the cost of insurance against losses in U.S. stocks, jumped 20 percent. Shares of Ford Motor Co. plunged 11 percent as the automaker said profit slid 79 percent. Amazon.com Inc. declined 7.8 percent after saying earnings may miss analystsâ€™ projections.
The NYSE Arca Airline Index lost 4.2 percent after oil jumped. The Suez Canal, which connects the Mediterranean and Red Seas, moved 1 million to 1.6 million barrels a day of oil and refined products north to Europe and other developed economies in 2008 and 2009, according to the Energy Information Administration, the statistical arm of the U.S. Energy Department. The EIA identified the canal as one of seven â€œworld oil transit chokepointsâ€ in a report earlier this month.
Microsoft Corp. had the biggest drop in the Dow, retreating 4.1 percent, after a shortfall in Windows revenue raised concerns about future demand. The slump helped drive the Nasdaq Composite Index to a 2.2 percent decline.