Sun, Jul 05, 2015 page15

• US stocks fall on Greek debt saga

  ‘GREXIT’ FEARS: A global rout saw the S&P 500 suffer its steepest drop in more than 14 months, but analysts believe even a Greek exit from the euro will not be catastrophic

  • AFP, NEW YORK
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  Fears of a messy Greek debt default overshadowed generally solid US economic data, pushing Wall Street for a loss in the week that closed out the first half of the year.

  The Dow Jones Industrial Average shed 216.57 points (1.21 percent) to 17,730.11.

  The broad-based S&P 500 dropped 24.83 (1.18 percent) to 2,076.78, while the tech-rich NASDAQ Composite Index lost 71.3 (1.4 percent) at 5,009.21.

  The holiday-shortened week opened in dramatic fashion, as worries about an impending Greek default resulted in a global rout Monday that extended to New York, where the S&P 500 suffered its steepest single-session drop in more than 14 months. Trade the rest of the week was choppy, depending on the perception of the likelihood of a deal on Greece and the country’s missing a 1.5 billion euro (US$1.7 billion) debt payment to the IMF on Tuesday.

  Wall Street will be closely watching Sunday’s Greek referendum on the creditors’ reform plan.

  “Hopefully, we don’t get a ‘no’ vote, because that would lead to a lot of volatility in global markets,” Ventura Wealth Management portfolio strategist Tom Cahill said.

  The fear is that a “no” vote could expand the country’s crisis to other vulnerable eurozone economies, such as Portugal, Spain and Italy, Cahill said.

  “Nobody know what the impact may be for global markets, since financial institutions are so interconnected,” he said. “But that’s going a long way and I don’t think it would happen.”

  Hugh Johnson of Hugh Johnson Advisors, said a “no” vote could “create a fairly significant downdraft in equity markets in the US and Europe.”

  However, many analysts have also said that the Greek economy is small and that even a worst-case “Grexit” might not have dire consequences.

  This view was strengthened by the fact that last week’s declines were not catastrophic.

  “If Greece gets us dead center, it will be short-lived,” Johnson said. “It’s not a game-changer.”

  Meanwhile, the US jobs report for last month turned out to be a mixed bag. While the headline number of 223,000 new jobs came in above the key 200,000 benchmark, average hourly earnings were flat compared with May and the US Department of Labor cut its estimates for job growth in April and May.

  Other new reports included a solid uptick in consumer confidence, a rise in pending home sales and modest growth in manufacturing activity.

  Last month’s auto sales were also a bright spot. Total industry sales rose 4 percent and hit a seasonally adjusted pace of 17.2 million vehicles, according to Autodata.

  That is the fastest pace recorded in June since 2005.

  “We just wrapped up the US auto industry’s best six months in a decade, driven by strong demand for pickups and crossovers,” General Motors Co head of sales Kurt McNeil said.

  Merger and acquisition activity also remained fairly brisk. The week’s deals included the US$28.3 billion purchase of insurer Chubb by Swiss insurer Ace Limited; the US$6.8 billion acquisition of Health Net by rival health insurer Centene; and the decision by US professional services company Towers Watson and insurance broker Willis Group to combine in a deal with an implied equity value of about US$18 billion.

  On the opposite side of the equation, food services company Sysco abandoned a planned US$8 billion takeover of US Foods following the opposition of US antitrust regulators.

  Also, the Justice Department sued to block the sale of General Electric’s appliance business to Sweden’s Electrolux, saying the US$3.3 billion deal would harm consumers. The US Department of Justice has also launched an antitrust probe on whether US airlines have engaged in “possible unlawful coordination.”

  Analysts expect Greece to remain at the forefront in the coming week.

  The calendar includes the US trade balance for May, minutes from last month’s US Federal Reserve meeting and results from aluminum giant Alcoa, leading off the second quarter earnings season.
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