Market Recap: Stocks Drop on Worries Over Europe—Again

The Blaze

Markets closed down on Wall Street today:

  • Dow -1.14 percent

  • S&P -1.25 percent

  • Nasdaq -1.31 percent

  • Oil -1.78 percent

  • Gold -2.55 percent

On the commodities front:

  • Oil (NYSE:USO) fell to $99.54 a barrel

  • Gold (NYSE:GLD) falling to $1,554.80 an ounce

  • Silver (NYSE:SLV) fell 6.02 percent to settle at $27.01

(Related: China Signs Deal to Exploit Afghanistan’s Oil and Natural Gas Reserves)

Today’s markets were down because:

1) Holidays: Trading will be light throughout the holiday week, and so far little has happened in the U.S. market, leaving investors with few economic or corporate cues.

However, low trading volumes can lead to more pronounced swings that today pulled the three major indices down more than 1 percent. With little news to rock markets today, investors are instead looking at the bigger picture — the U.S. economy has shown signs of “improvement” in terms of consumer spending and unemployment, but the debt crisis in Europe continues to threaten the global economic outlook, and could reverse progress made in the last quarter.

2) Euro: European equities advanced earlier in today’s session after an Italian debt auction where short-term borrowing costs were halved, which could be a good sign for a sale of longer-dated bonds on Thursday. However, those gains were short-lived, as the euro fell to $1.2938, its lowest since January. With little else for investors to latch on to, the declining euro sparked a sell-off in early morning trading that continued throughout the day.

3) Oil: Iran has threatened to cut off access to the Strait of Hormuz, a vital artery through which one-fifth of the world’s oil supply is transported, if the U.S. follows through on planned economic sanctions meant to thwart Iran’s nuclear ambitions.

The sanctions would substantially reduce Iran’s oil revenue by penalizing foreign corporations doing business with Iran’s central bank, which collects payment for most of the country’s energy exports. Oil exports finance as much as half of Iran’s budget. Iran’s response — to threaten blocking access to the strait — may have been calculated to cause a spike in oil prices, which rose above $100 a barrel shortly after the threat was issued, as a warning to American trading partners against joining the new sanctions, but that does not mean that it won’t follow through on its threat should the U.S. continue to threaten the nation’s livelihood.

[Editor’s note: the above is a cross post that originally appeared on Wall St. Cheat Sheet.]