It’s been a summer of panic and fear for investors. European debt and fresh fears of recession hammered the Dow Jones index by 300 points. The drop erased all gains made by the market over the week. Traders fear that the troubled euro countries may default in their payments causing a ripple of panic in the economy. This in effect will make borrowing difficult for the other countries weighing down possibilities of a recovery. In the U.S., economic growth is already slowing, and unemployment is stuck above 9 percent.
The markets also got an opportunity to react to the job act introduced by the President Obama in the Congress. The bill included a spending of $300 billion on creating jobs across the economy. Over the end of the trading day the Dow closed at 10992 down 300 points.
In the bonds market, the 10 year treasury yield went to 1.92 percent. Traders look for safe investment avenues in a volatile market and have invested heavily in US treasury bonds across the summer. The worrying signs however for the markets is the heavy investment by Euro nations in countries who are deep in debt. Banks in Europe hold bonds issued by nations deep in debt, including Greece, Ireland and Portugal at the moment.
In the currency markets the Euro fell to a six month low versus the dollar over worries of a possible default worries in Europe.
With news related to companies, McDonald’s faced pressure in the markets due to disappointing results. Tata Motors who recently acquired Jaguar and Land Rover had a setback as its CEO Carl-Peter Forster resigned due to personal reasons. Mr Forster was instrumental in revitalizing the brand in Europe.