Wall Street drops on fear, uncertainty

09:40, July 19, 2011      

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U.S. stocks declined on Monday as concerns over European and U.S. debt problems weighed heavily on the market.

In the United States, the talks between two parties on the debt ceiling seemed to stall. Ratings agency Moody's suggested Monday Washington should eliminate its statutory limit on government debt to reduce uncertainty among bond holders. The U.S. debt limit should be raised by Aug. 2 or the U.S. government will risk defaulting on its debt.

As for euro zone crisis, the result of European banking stress tests on Friday showed that eight banks failed the test with a combined capital shortfall of 2.5 billion euros. Some investors doubted the test might not be tough enough because it excluded the possibility of Greek debt default.

Concerns about the euro zone debt crisis lingered in the market and investors fled to seek refuge. The dollar was lifted by risk-aversion investments as the dollar index gained 0.46 percent to 75.47 in late trading session on Monday.

"Fear and uncertainty is starting to increase," said Ben Willis, floor director of Sunrise Securities, told Xinhua.

According to Willis, VIX, a crucial volatility index, was up 50 percent from a few weeks ago, but volume still very low.

Investors' fear made the price of gold for August delivery close at a record high of 1,602.4 U.S. dollars an ounce on Monday, up 12.3 dollars from last week's close. Silver closed at 40.33 U.S. dollars an ounce, up over 3 percent.

Investors believed that gold prices reflected people lost confidence in paper money. They were not willing to make big purchase decision on the stock market.

As for shares, financial and transportation sectors suffered a lot on Monday, down 1.48 percent and 1.13 percent respectively.

The Dow Jones industrial average lost 94.57 points, or 0.76 percent, to 12,385.16. The Standard &Poor's 500 declined 10.70 points, or 0.81 percent, to 1,305.44. The Nasdaq Composite Index dropped 24.69 points, or 0.89 percent, to 2,765.11.

Source:Xinhua
 
 
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