A slumping US dollar, weak gold and oil, poor US consumer sentiment, weak quarterly reports and low inflation.
It was a collection of negatives or near negative factors in the eyes of US investors on Friday, so it was no surprise that markets weakened on Friday.
The US dollar hit a two month low against the euro, a seven month low against the yen and gold fell to an eight week low. Copper fell and other commodities were mixed.
US bond yields fell, with the 10 year yield back under 3% at 2.94%.
What was a surprise was that Wall Street fainted and sold off, wiping out the week’s gains and ending the rebound of the past fortnight or so.
Major US indexes fell more than 2% as investors ignored what were spun as ‘good’ results from GE, Citigroup and Bank of America, but which turned out to be weak and of poor quality.
The slide in the Standard & Poor’s 500 index of nearly 3%, broke the 7% rally in the two weeks to last Thursday.
More poor quality economic data confirmed the rightness of the Fed’s downgrading of its forecasts and its growing belief that the US economy is heading lower and slower.
The Dow dropped 261.41 points, or 2.52%, to 10,097.90; the S & P 500 fell 31.60 points, or 2.88%, to 1,064.88 and the Nasdaq Composite Index lost 70.03 points, or 3.11%, to 2,179.05.
For the week, the Dow fell 1%, while the S&P 500 dropped 1.2% and the Nasdaq 0.8%.
The sell-off wiped out the gains for the week, which had been between 1.7% and 2.3% up to Thursday’s close.
The best comment came Friday morning, before the market had opened from Canadian economist, Dave Rosenberg who wrote in his morning newsletter on Friday:
"Only a fool or the most visually challenged can’t see that growth is moderating significantly.
"Forecasts for a slowing towards 2% real GDP growth are no longer rare. Canada too is softening and the cracks are starting to deepen in the housing market.
"This could get exciting, and the stock market, as it was in 2000 and 2007, is seemingly oblivious.
"Main Street investors continue to ignore Wall Street strategists by shunning the ever-volatile equity market for safety and income at a reasonable price.
"The ICI ( a measuring firm) data just came out for the July 7th week and it showed a net outflow of $4.2 billion from equity funds while bond funds attracted $6 billion of fresh money on top of $3.5 billion the week before."
He said that looking at the week’s data from the Fed on industrial production, especially manufacturing (including surveys for the Midwest and the eastern states, as well as the country as a whole, "In terms of sector performance, motor vehicles, wood products and printing appear to have the most amount of slack relative to long-term trends, which is a negative for pricing power going forward.
"However, the IT sector (computers specifically), mining and petroleum and coal products are running at or near long-term capacity, suggesting that these sectors are the best positioned in terms of pricing power."
And after the close of business Friday US state and federal banking regulators closed six small local or regional banks in Florida, South Carolina and Michigan.
Total cost to taxpayers was more than $US330 million for the six. That makes 96 US banks to be shut so far this year against 140 in 2009.
Friday saw GE’s fall 4.6% after reporting higher profits, but a fall in sales.
Citigroup lost 6.3% as it profits and sales disappointed, likewise Bank of America was down 9.2% after its quarterly report revealed weak trading income (also at Citi) and lower revenues.
European shares closed lower on Friday, with London’s FTSE 100 index of leading shares down 1%, the CAC 40 in Paris off 2.28%, while the Frankfurt DAX lost 1.77%.
The Stoxx 600 fell 0.8% on Friday, to cut the week’s rise to 5.4%.
After Wall Street’s big falls on Friday, European markets will slump tonight.
That was the biggest weekly gain in a year. The index remains 8.8% under its peak on April 15.
Asian markets finished flat to lower on Friday, Japan’s Nikkei fell 2.9%, while Hong Kong’s Hang Seng and the Shanghai Composite both ended little changed.
The MSCI Asia Pacific Index rose 0.1% last week, the second up week in a row. But it was only due to a rise in Indian shares in trading on Friday that left the region up over the five days.
The Nikkei fell 1.9%, Shanghai lost a similar amount, Hong Kong’s Hang Seng Index lost 0.6%, but Sydney was up 0.6%, South Korea by the same amount and Singapore ended up 1.4% after the strong growth figures midweek.
In Australia, the ASX200 Index ended the day down 19.9 points, or 0.4%, at 4427.7 points, while the All Ordinaries Index was also down 19.7 points, or 0.4% on 4437 points.
The Australian dollar, meanwhile, was trading almost exactly where it ended last week, at about 87.6 USc.
It fell in offshore trading Friday to close in New York at 86.90 USc.
