View full sizeWall Street continued to struggle into the afternoon on a light trading day ahead of the three day Memorial Day Weekend.
The
market struggled for direction Friday afternoon, with two major indexes
wavering indecisively between small gains and losses.
Trading was light as investors prepared for the Memorial Day weekend.
“People
are sitting on their hands, waiting for something to happen,” said Jeff
Schwarte, portfolio manager at Principal Global Investors in Des
Moines, Iowa.
The perpetual concerns that have plagued the market
this month — Europe’s debt crisis, the limping U.S. economy, a slowdown
in China’s growth — recorded a few incremental developments.
The
head of Germany’s central bank, which has been skeptical of bailing out
Greece and other weak European countries, reinforced the point when he
said it was an “illusion” to think allowing euro zone countries to
borrow money jointly would solve the crisis. In teetering Portugal, the
parliament endorsed a budget plan that would set legal limits on
government spending. And Spain’s market regulator suspended trading of
shares in Bankia, a bailed-out bank that is preparing to ask for even
more rescue money from the government.
In Asia, media reports
suggested that some of China’s biggest banks will miss their annual
lending targets for the first time in seven years, and Taiwan lowered
its economic growth forecast for the year.
Caterpillar, which relies heavily on demand from China, fell 1 percent.
Facebook,
marking its one-week anniversary as a public company, fell nearly 4
percent to $31.80. Talbots, the women’s clothing chain, plunged 39
percent to $1.56 after announcing that a deadline expired without a deal
to be acquired by Sycamore Partners.
In the early afternoon, the
Dow Jones industrial average was down about 61 points to 12,468. It has been
on a steady slide this month, giving up most of the gains it notched in
the first quarter. It’s heading for its first losing month since
September.
The Standard Poor’s 500 index was virtually flat at 1,321. The Nasdaq composite rose 2 points to 2,841.
In
Europe, stock indexes in France, Britain, Germany and Spain rose, while
Greece’s ATHEX plunged 3.5 percent. Borrowing rates edged higher for
Spain and Italy.
Greece’s June 17 elections are an overhang on the
market. The results will determine if Greece agrees to the spending
cuts that it must swallow if it wants to stay in the 17-country euro
zone, or if it goes its own way.
The idea of cutting government
spending is unpopular in a country where residents have grown used to
public-sector largesse. But if Greece left the euro zone, it would have
to revert to its own currency. That would be severely devalued, and the
country’s standard of living would probably be crushed.
Greece
makes up just 2 percent of the euro zone economy, but its fate would
carry ripple effects to other, larger members. Unnerved traders could
dump the bonds of other struggling European countries, such as Spain and
Italy. Residents could start to pull money out of banks there, as has
been happening in Greece.
The standoffs so far have almost always lasted until the 11th hour.
“Every
time you think it’s going to fall off a cliff and end very badly,
something happens,” said Beata Kirr, senior portfolio manager at
Bernstein Global Wealth Management in Chicago. “The European Central
Bank steps in to buy Italian and Spanish bonds. Or Germany softens its
stance on austerity. All of these things have happened when it’s past
the precipice.”
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