Sun, May 20, 2012 - Page 10 News List

Dull Facebook debut caps down week for US stocks

SAVING FACE:Despite the hype surrounding Facebook’s IPO, underwriters were apparently forced to prop up its shares from falling below the subscription price of US$38

AFP, NEW YORK

A dull debut for Facebook, one of the most heavily anticipated public offerings in years, crowned another down week for US markets as eurozone instability kept fear levels high among investors.

Facebook’s US$16 billion IPO on Friday very nearly turned into a flop, with underwriters reportedly forced to prop the shares up to keep them from going below the US$38 subscription price.

However, with fears of an unavoidable march in Greece toward a eurozone pullout and Spain looking like it needs a rescue, buyers generally fled the market for the safety of cash and US and German bonds.

For the week the blue chip-focused Dow Jones Industrial Average was down 3.5 percent to 12,369.38. The broad-based S&P 500 lost 5.3 percent to 1,295.22, while the NASDAQ, the exchange that listed Facebook, gave up 4.3 percent to 2,778.79.

For all the hype that was the Facebook IPO, valuing the eight-year-old company at more than US$100 billion, it was the political stalemate that forced Greece to call elections for the second time in weeks and the sharp deterioration of Spain’s banks that drove the market.

“Market confidence continued to erode this week due to events in Europe, including capital flight from Greece and the downgrade of several Spanish banks,” IHS Global Insight economists Paul Edelstein and Nigel Gault said.

Since the beginning of this month, the S&P 500 has lost 8.8 percent and the NASDAQ 7.3 percent, and all three indices were lower than they were a year ago.

Analysts pointed to more weak — though not decisively so — data on the economy and minutes from the US Federal Reserve’s recent policy meeting that showed the central bankers still worried about anemic growth.

Corporate reports were mixed, but many lowered their expectations for the rest of the year, casting a pall on the optimists.

“Looking ahead, global stock markets are likely to continue to struggle in the near term as the eurozone casts a new dark shadow on markets,” John Praveen of Prudential International Investments Advisers said.

“A European recession and fiscal restraint in the US keep the overall risks tilted decisively to the downside,” Nomura Securities analysts said.

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