Dow drops 251 points
The Dow fell 251 points on Thursday to close at 12,573, according to CNBC. The drop was blamed on anticipated bank downgrades by Moody’s and the ongoing European crisis. European and Asian markets remain negative on Friday after economic reports suggest growth will continue to weaken in most of the world’s major economies.
Moody’s downgrades major banks
Moody’s rating service downgraded the credit ratings on some of the world’s largest banks, including Bank of America, JP Morgan Chase and Goldman Sachs, according to the Associated Press. The ratings agencies also lowered ratings on Barclays, Deutsche Bank, and HSBC, some of the largest European banks. Generally, this means that the banks will have to pay more for their debt. Moody’s sorted the banks into three segments. The “safest” banks are JP Morgan Chase, HSBC, and Royal Bank of Canada because they have the ability to offset foreign debt crises. The second group relies on market based businesses and includes Goldman Sachs, Deutsche Bank and Credit Suisse. The weakest banks, according to Moody’s, are Bank of America, Citigroup, Morgan Stanley and Royal Bank of Scotland. Moody’s claims these banks have poor risk management and high volatility.
Leaders of Big Four Eurozone countries meet
The leaders of Germany, France, Italy and Spain are meeting in Rome today to see if they can find common ground to restore confidence in their economies, according to Reuters. A summit is planned for June 28 and 29 where many hope that some methods to achieve fiscal and banking unions throughout the Eurozone will be discussed. IMF chief, Christine Lagarde, is pushing for a banking union.
Gas prices fall
One of the silver linings to the dark economic cloud is the falling price of gasoline. According to USA Today, regular gasoline averages $3.47 per gallon, down 47 cents from this year’s high in April. On Thursday, oil fell to $78.20 per barrel, the lowest price since October. Oil inventories are at a 20 year high because of lower demand and increased production. Lower gas prices result in roughly $114 billion in extra consumer spending power according to economists at IHS Global Insight.
German business confidence falls
Germany, currently the economic leader in Europe, reported the fall of its business confidence index to the lowest level in two years, according to theWall Street Journal. The data suggests that Germany’s economic output will stall or shrink in the second quarter. The data also suggests that the German economy cannot shield itself from what is happening in the rest of Europe.
Large Companies Issue Profit Warnings
Many bellwether companies have issued profit warnings in recent days with the slowdown in Europe being cited as the cause. CNBC reports that firms such as PepsiCo, FedEx and Phillip Morris have all issued profit warnings in recent days. Proctor and Gamble lowered its earnings expectations due to the slowdowns in both Europe and China. Experts indicate that the Standard and Poor’s 500 will show a 6.3 percent rise in the second quarter, down from the 9.1 percent rise predicted in April. If Apple’s numbers are pulled from that percentage it decreases to 5.5 percent.
Cost of charging your iPad for a year? $1.36
The cost to charge your iPad for a year is $1.36, according to the Electric Power Research Institute. According to USAToday, if Americans shift from using televisions to play video games to the iPad, or if they ditch their desktops for iPads, the power consumption in the US will decrease. The cost to charge your iPhone for a year? 38 cents. Compare that to the $28.21 annual cost for your desktop computer or the $65.72 for your refrigerator.
Catherine S. McBreen is President of Millionaire Corner. McBreen plans and develops content for Millionaire Corner. Catherine balances editorial content to meet the informational needs of both new and seasoned investors. She designs special monthly surveys on topical issues affecting the economic environment.
McBreen has a B.S. in speech communications from Northwestern University and a J.D. from DePail University College of Law. She is a member of the American Bar Association, the Illinois Bar Association, and the Chicago Bar Association.
Well-known for her expertise in the affluent and retirement arenas, McBreen is a frequent speaker at industry conferences. She has been quoted widely by the financial media, including The Financial Times, The Wall Street Journal, Research, Private Asset Management, On Wall Street, Reuters, Bloomberg News, The Dow Jones Newswires and Worth. Cathy has appeared as a guest on CNBC Closing Bell, First Business Morning News, Neal Cavuto at Fox Business News, ABC and CBS radio.
McBreen is co-author with Spectrem President George H. Walper, Jr. of the book "Get Rich, Stay Rich, Pass It On: The Wealth-Accumulation Secrets of America's Richest Families" (Portfolio, January 2008)
Catherine is the mother of four and is involved in many school and community events.