Euro plunges on Greek worry; U.S. stocks up

By Jennifer Ablan

NEW YORK (BestGrowthStock) – The euro plunged to its lowest level against the dollar in almost a year on Thursday and European equities fell after Moody’s slashed Greece’s sovereign rating, hours after the European Union said the country’s budget deficit was worse than feared.

U.S. stocks (Read more about the stock market today. ), however, staged a late-day comeback even as increasing evidence of Greece’s deteriorating financial position eroded risk appetite elsewhere.

Moody’s Investors Service downgraded Greece’s sovereign rating one notch to A3, four notches above speculative, or “junk” status. It cited risks the debt-strapped country may end up paying much more for its borrowing than previously thought.

Earlier, the EU’s official statistics agency said the Greek budget deficit last year was 13.6 percent of gross domestic product, and not the 12.7 percent estimated by the Greek government.

The news intensified fears about Greece’s ability to avoid default.

“Today it is a Greek story. The market seems to be pricing in some default or restructuring,” said Mike Lenhoff, chief strategist at Brewin Dolphin.

The euro plunged for a sixth-straight session to $1.3260 after the Moody’s news and reached its lowest level since May 2009, according to Reuters data. It was last at $1.3306, down 0.97 percent on the day. Against the pound, the euro fell (Read more about the trembling euro. ) as low as 86.30 pence, its weakest since late January.

Greece’s two-year government bond yield soared four percentage points to 12.26 percent as investors bet the country would need a bailout to avoid a debt restructure or default.

The cost of insuring Greek government debt against default hit a record high above 600 basis points. Five-year credit default swaps on Greek government debt rose to 616 basis points, making it the most expensive sovereign debt in Europe to insure against default, according to CMA DataVision.

The news on Greece first weighed on U.S. equities markets, but earnings dominated the late-day action in stocks.

First-quarter earnings estimates are rising. With 98 Standard & Poor’s 500 companies reporting so far, earnings for the quarter are now seen up 46.4 percent from a year ago. At the start of the month, earnings were expected to be up 36.6 percent, according to ThomsonReuters data.

At close, the Dow Jones industrial average (.DJI: ) was up 9.37 points, or 0.08 percent, at 11,134.29, while the Standard & Poor’s 500 Index (.SPX: ) was up 2.73 points, or 0.23 percent, at 1,208.67. The Nasdaq Composite Index (.IXIC: ) was up 14.46 points, or 0.58 percent, at 2,519.07.

The pan-European FTSEurofirst 300 (.FTEU3: ) index of top shares closed down 1.1 percent at 1,083.88 points, having earlier been up as much as 1,102.69 points.

European banks extended their slide from the previous session. Greek banks (.FTATBNK: ) slipped 5.4 percent.

MSCI’s all-country world equity index (.MIWD00000PUS: ) was down 0.6 percent.

NOKIA OUT SMARTED

While U.S. equities erased losses, technology shares tumbled on disappointing forecasts at Nokia, eBay Inc. and Qualcomm Inc..

Nokia cut its profit outlook for its key phone unit as it faced tough competition in the smartphone market. Its U.S.-listed shares tumbled more than 13 percent to $12.99 .

Chip maker Qualcomm late on Wednesday gave a weak forecast for the current quarter and full year, sending its stock down nearly 8 percent on Thursday.

Shares of eBay dropped about 6 percent after its forecast for the rest of the year fell short of expectations.

U.S. Treasury debt prices declined as investors cut positions and hedged bets ahead of record new government debt issuance next week. U.S. stocks (Read more about the stock market today. ) recouped losses.

The benchmark 10-year U.S. Treasury note was up 8/32, to yield 3.77 percent, while the two-year U.S. Treasury note US2YT=RR was up 2/32, yielding 1.03 percent. The 30-year U.S. Treasury bondwas up 9/32, with the yield at 4.64 percent.

In currencies, the dollar was up against a basket of major trading-partner currencies, with the U.S. Dollar Index (.DXY: ) up 0.58 percent at 81.628 from a previous session close of 81.161.

Against the Japanese yen, the dollar was up 0.45 percent at 93.55 from a previous session close of 93.130.

In energy and commodities prices, U.S. light sweet crude oil rose 6 cents, or 0.07 percent, to $83.74 per barrel. Gold prices fell under pressure from the stronger dollar. Spot gold fell $3.90, or 0.34 percent, to $1,141.40. The Reuters/Jefferies CRB Index (.CRB: ) was up 0.37 points, or 0.13 percent, at 277.12.

Stock Report

(Additional reporting by Gertrude Chavez-Dreyfuss in New York and Jeremy Gaunt in London; Editing by Andrew Hay)

Euro plunges on Greek worry; U.S. stocks (Read more about the stock market today. ) up