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NEW YORK — A setback in talks between Greece and its creditors helped knock the stock market lower on Friday, amid renewed concerns that the country could default on its debts.

Despite the drop, the Standard & Poor’s 500 index managed to eke out a 1-point gain for the week, snapping a two-week slump.

An unexpected decision by the International Monetary Fund to walk away from talks with Greece spurred the selling. At a summit meeting in Brussels late Thursday, the IMF pulled its negotiators out of talks with Greece, saying there had been no progress and that major differences remained on key issues. Without a deal by the end of the month, Greece faces the prospect of going bankrupt and dropping the euro currency.

Markets are likely to make sudden turns until Greece and its creditors reach a deal, said Ninh Chung, head of investment strategy at SVB Asset Management. Earlier this week, stocks on both sides of the Atlantic rallied on reports of progress in the talks.

“There had been optimism over Greece,” Chung said, “and now it seems like we’ve had a complete 180.”

The S&P 500 slipped 14.75 points, or 0.7 percent, to close at 2,094.11. The Dow Jones industrial average fell 140.53 points, or 0.8 percent, to 17,898.84, and the Nasdaq composite lost 31.41 points, or 0.6 percent, to 5,051.10.

The losses were modest but broad: All 30 companies in the Dow and all 10 industries in the S&P 500 finished with losses.

Speculation over Greece’s fate and the Federal Reserve’s first interest rate increase have weighed on markets over recent weeks. Many think an improving U.S. economy will push the Fed to raise its benchmark interest rate later this year for the first time since the Great Recession. The Fed’s ultra-cheap interest rates have helped fuel the six-year bull market in stocks.

“I’m not sure the downside risk with Greece is as big as investors believe, but it’s caught investors’ attention,” said Jack Ablin, chief investment officer at BMO Private Bank. “It’s the same with the Fed tightening.”

Major indexes in Europe slumped on Friday, wiping out gains from earlier in the week. Greece’s market fell the most, with the main Athens index down 6 percent. Germany’s DAX sank 1.2 percent, and the CAC-40 in France finished with a loss of 1.4 percent. Britain’s FTSE 100 lost 1 percent.

In Asia, Japan’s Nikkei 225 inched up 0.1 percent. In China, the Shanghai composite index advanced 0.9 percent, and Hong Kong’s Hang Seng rose 1.4 percent.

MATTHEW CRAFT, AP Business Writer

 

 

The post Greek Jitters Upset Markets appeared first on The National Herald.

Source: The National Herald
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