Market turmoil continues. Dow closed yesterday at 10,620 falling 162 points for the day. The euphoria from the €750 billion agreement by the EU and IMF more or less fizzled out.
There are signs that debt crisis in Europe will come back to haunt the market again. The EUR has weakened against the USD and it has fallen below 1.25. This is not a good sign as traders continue to sell EUR despite repeated calls from EU that they will support the Euro.
With USD at record high against the EUR, this will mean that exports from US will be less competitive and this will in turn affect earnings of US companies that derived significant business from the EUR zone.
The problems in Europe have a negative impact on the US stock market. The Dow Industrial Average is now in “Warning” phase suggesting further weakness ahead. The index dropped below its 200 day moving average 6 May and even though a rebound followed, the index is finding difficulties staying above its 50 day moving average. It looks likely that the index will test its 200 day moving average again. As of Friday, the 200 day average stood at 10,234.
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