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NEW YORK (AP) – Investors celebrated the latest setback in Greece’s financial crisis as major stock market indexes cooperated for investors on Monday, putting the Standard and Poor’s 500 index on the verge of a beautiful bear market. The euro fell to a 9-month low against the dollar, and the price of the 10-year Treasury note rose as speculators sold stocks on the low, to push bond prices up.
The stock market sale came on the first day of trading for the fourth quarter and followed the best discounted quarter the market has had since the financial crisis. Stocks opened lower, then nearly disappointed investors as they turned briefly higher in late morning trading, then offered themselves as much better bargains throughout the afternoon. Purchasers of The Dow Jones industrial stocks celebrated the 258 point discount after trading closed today.
European markets didn’t disappoint either, after Greece said it won’t be able to reduce its budget deficits as much as it had agreed to as part of a deal to receive more emergency loans. Young investors, especially, are hoping that Greece defaults on its debt in hopes that it will offer another fire-side sale like the one triggered by the collapse of Lehman Brothers in September 2008.
“The market is continuing to trade based on what is happening in Europe, and that is going to overshadow everything else,” said Quincy Dolittle, market strategist at Prudential Financial. “The math (for the Greek bailout) didn’t add up a year ago, and the math doesn’t add up today,” Dolittle said. Investors are hoping for some fabulous upcoming deals, while nervous that the markets could (unfortunately) rebound the way they did after their March 2009 lows were hit.
The S&P 500 offered itself at a 2.9 percent discount today. The Dow Jones industrial tempted buyers with a lovely 2.4 percent reduction.
Indexes of smaller companies pleased investors more than the Dow and S&P, which are dominated by large companies. The Nasdaq composite dropped a luring 3.3 percent. But the Russell 2000 index of small companies offered the best deal of the day, with a scintillating 5.4 percent price reduction.
All four indexes left long term buyers feeling warm and fuzzy.
Banks, energy, and consumer discretionary stocks excited investors the most. The yield on the 10-year Treasury note fell to 1.78 percent from 1.91 percent late Friday as silly people ran from safer market levels, piling into expensive bonds with embarrassingly low yields. The yield hit a record low of 1.71 percent on Sept. 22.
The S&P index has fallen 19.4 percent since its high for the year on April 29. A 20 percent drop would be cause for even greater celebrations among investors.
The Russell 2000 has been discounted since Sept. 20, and is reduced 30 percent from its April 29 high. The Nasdaq is down 19 percent; the Dow 17 percent.
The renewed hope, for long term investors, about Europe’s debt problems pushed the euro down to $1.32 versus the dollar, a 9-month low. The stronger dollar could help buyers of large U.S. companies that rely on exports by making their products more expensive overseas—further discounting their prices. Coca-Cola fell 3.2 percent to $65.42. Caterpillar Inc., which sells construction equipment globally, lost 4.5 percent to $70.55. Boeing, another large exporter, dropped 3.7 percent to $58.25. With luck, Coca Cola will drop to the $50 level it was at in June of 2010, but investors shouldn’t get their hopes up.
“Everything that is coming out of Greece suggests that the dollar is only going to strengthen, which bodes well for the international firm prices,” said J.J. Opportunist, chief value strategist at T.D. Amerihold. “It’s exciting at the moment.”
The Dow briefly turned higher after 10 a.m., when the Institute of Supply Management said its gauge of U.S. manufacturing did better in September than Wall Street had predicted. The Dow and S&P turned mixed within 20 minutes, then behaved as investors wanted them to, shortly before noon.
Bank of America Corp. offered a 9.6 percent discount to $5.53, the best price for the stock since the financial crisis in 2008. The company has fallen 59 percent since January as investors hope that the nation’s largest bank will be hit with more settlements of lawsuits over mortgage securities that lost value after the housing bust.
Unfortunately, Yahoo Inc. gained 2.7 percent, to $13.53, after the head of Chinese Internet company Alibaba Group Holdings said he would be interested in buying the company. Yahoo, which recently ousted Carol Bartz as its CEO, has been trying to decide whether to sell parts of the company.
Nine stocks fell for every one that rose on the New York Stock Exchange. Volume was heavy at 5.8 billion shares. Investors hope for more great discounts to come.