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Stock Market Update for 11/16/2011

November 16, 2011

Stocks moved sharply lower at the start of trading on Wednesday, giving back some ground after moving mostly higher over the course of the previous session. The major averages all moved to the downside but did not see much follow-through on the initial downward move.

The major averages have climbed off their lows for the young session but currently remain firmly negative. The Dow is down 102.02 points or 0.8 percent at 11,994.14, the Nasdaq is down 13.65 points or 0.5 percent at 2,672.55 and the S&P 500 is down 8.63 points or 0.7 percent at 1,249.18.

The initial weakness on Wall Street was largely due to continued concerns about financial situation in Europe, with the Bank of Japan warnings that its domestic economy could be hurt by the ongoing European debt crisis.

Disappointing Spanish GDP data showing a stagnation in economic activity has also generated some negative sentiment, with the data likely to lead to higher bond yields during a Spanish bond auction on Thursday.

Meanwhile, newly appointed Italian Prime Minister Mario Monti announced that he has formed a new government and the new Greek government under Prime Minister Lucas Papademos faces a vote of confidence in parliament.

Upbeat U.S. economic data has helped to limit the downside for the markets, however, as the Federal Reserve released a report showing a bigger than expected increase in industrial production in October.

The report showed that industrial production increased by 0.7 percent in October following a revised 0.1 percent decrease in September. Economists had expected production to increase by 0.4 percent compared to the 0.2 percent growth originally reported for the previous month.

Nonetheless, brokerage stocks are seeing significant weakness in early trading, resulting in a 1.6 percent loss by the NYSE Arca Broker/Dealer Index. Japanese financial service provider Nomura Holdings (NMR) is turning in one of the sector’s worst performances.

Healthcare, biotechnology, gold, and defense stocks are also seeing early weakness, while oil service stocks are seeing some strength amid a notable increase by the price of crude oil.

In overseas trading, stock markets across the Asia-Pacific region came under pressure over the course of the trading day on Wednesday. Japan’s Nikkei 225 Index fell by 0.9 percent, while Hong Kong’s Hang Seng Index tumbled by 2 percent.

Meanwhile, the major European markets are turning in a mixed performance on the day. While the French CAC 40 Index is up by 0.2 percent, the U.K.’s FTSE 100 Index and the German DAX Index are down by 0.4 percent and 0.5 percent, respectively.

In the bond market, treasuries are seeing moderate strength amid the continued concerns about Europe. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 2.9 basis points at 2.028 percent.

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