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Shanghai, Greece set off global stocks rout but US escapes

Afp Shanghai Greece Set Off Global Stocks Rout But Us Escapes

New York (AFP) - The US Tuesday largely escaped a global rout that pounded equities from Shanghai to Buenos Aires on worries ranging from tightened Chinese lending rules to another bout of eurozone turmoil.

The red tide on trading screens began in Asia, continued in Europe and reached as far as Argentina, where stocks fell 7.22 percent on gloom over the oil market.

But US equity markets largely bucked the trend after the Dow initially fell more than 200 points in early trade. US investors have shown a strong buy-the-dip conviction all year and that trend continued Tuesday. 

"It's a further demonstration of the belief that the US market remains the best option for equity investments," said Michael James, managing director of equity trading at Wedbush Securities. 

"Pullbacks will continually be bought until that's proven not to work."

The blue-chip Dow index finished just 0.29 percent lower, while the tech-rich Nasdaq advanced a healthy 0.54 percent and the S&P 500 slipped a scant 0.02 percent. 

Analysts see the US strength as testament to the comparatively strong economic outlook in the world's biggest economy. 

In its preview for markets in 2015, Bank of America projected another good year for US stocks. It projected the S&P 500 would rise to 2,200.

"Robust US economic growth continues to outpace the rest of the world, boding well for US employment, wages and housing in 2015," the bank said.

-Slump hits China, Europe-

By contrast, Tuesday's performance in Asia and Europe pointed to greater uncertainty about those regions.

Chinese equities were battered, with Shanghai's equity market falling 5.4 percent. 

The drop came after Chinese authorities announced a new rule late Monday tightening the use of corporate bonds as collateral for short-term financing -- a move analysts said will curb investors' ability to trade on margin.

Tokyo dropped 0.68 percent, snapping a seven-session winning streak, while Sydney tumbled 1.68 percent as energy shares were punished.

Greek stocks plunged 12.8 percent -- the largest one-day drop in 27 years -- after the government unexpectedly brought forward a high-stakes presidential vote.

The move raised questions over the recovery plan for the country which nearly caused the breakup of the eurozone.

"It seems like old times today -- and not the good old times," Briefing.com analyst Patrick O'Hare said of the latest Greece news.

London's benchmark FTSE 100 fell 2.14 percent, Paris's CAC 40 sank 2.55 percent and  Frankfurt's DAX 30 shed 2.21 percent. 

"Political uncertainty in Greece acted as one of the main drivers for the sell-off in Europe after the Greek government brought forward the presidential election to next week," said Sucden Research analyst Kash Kamal.

Among individual stocks, Tesco shares were the biggest loser in London, sinking 6.6 percent to close at 174.90 pence after the big supermarket group sharply reduced its profit forecast.

Tesco said its trading profit "will not exceed £1.4 billion" ($2.2 billion, 1.8 billion euros) in its financial year to February 2015. Analysts' consensus had been for £1.94 billion as Tesco undergoes changes to its business triggered by a fraud probe.

In the US, telecom giants AT&T, Verizon and Sprint suffered big drops after Verizon warned that fourth-quarter earnings would be pressured by a "highly competitive and promotion-filled" business environment.

Some leading banking stocks also retreated after Citigroup announced a $3.5 billion charge in the fourth quarter due to legal and restructuring costs and Bank of America also signaled lackluster fourth-quarter trading revenues.

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Underwater Dining

Stocks were mixed, but little changed, on the first trading day of September, kicking off a busy week.

First, the scoreboard:

  • Dow: 17,067.56, -30.9, (-0.2%)
  • S&P 500: 2,002.28, -1.1, (-0.05%)
  • Nasdaq: 4,598.19, +17.9, (+0.4%)

And now, the top stories on Monday:

1. Three pieces of economic data were released Tuesday morning. ISM's August manufacturing index came in at its highest level since March 2011, coming in at 59.0 against expectations for 57.0. Following the report, Ian Shepherdson at Pantheon Macro said, "In one line: Very strong, but probably overstating the true performance of manufacturing." Markit's August manufacturing PMI came in at 57.9, up from 55.8 in July, and serving as the index's best reading since April 2010. "Improving domestic economic fundamentals remain the key engine of growth. However, there were finally signs of external demand gaining traction in August, despite weakness across the euro area," said Markit senior economist Tim Moore. Construction spending rebounded sharply in July, jumped 1.8% after falling -0.9% in June. Ian Shepherdson said the report was strong everywhere but housing, and he expects this split to continue.

2. The manufacturing reports also follow a rash of manufacturing data out of Europe yesterday, when U.S. markets were closed for the holiday. The latest run of data shows that U.S. manufacturing is currently the strongest in the world, with France pulling up the rear.

3. Home Depot shares were the Dow's biggest loser, falling more than 2% after security blog Krebs on Security reported that the company may be the victim of a massive data breach involving customer credit cards. Krebs reported that a preliminary analysis showed the breach may include all 2,200 of the company's U.S. stores. In a statement to Business Insider, Home Depot spokesperson Paula Drake said: "At this point, I can confirm that we’re looking into some unusual activity and we are working with our banking partners and law enforcement to investigate."

4. Tesla shares were up more than 5% after Stifel Nicolaus upped its price target on the stock to $400, nearly 50% higher than the stock's pre-Labor Day price. Stifel's James Albertine said that production for the company's Model S has considerably increased from a year ago, but said ultimately momentum behind the stock may be enough to push it higher. "Tesla sentiment is like a freight train, in our view, benefiting from a well-manicured growth story that has caught the eye of a much broader investor base relative to most auto stocks," Albertine said.

5. Staples shares gained more than 8%, while Office Depot added more than 6% after Credit Suisse analyst Gary Balter wrote that the two companies should consider merging. Balter said a combination between the two companies makes "significant" financial sense, and said the cash flow position of Staples makes this company an attractive target for an activist investor or private equity firm. 

6. The IMF issued a report warning that its $17 billion lifeline to Ukraine might not be enough, with Ukraine potentially needing an additional $19 billion un finding by the end of next year. 

7. After the iCloud accounts of more than 100 celebrities were hacked over the weekend, Apple issued a statement on Tuesday that said, "None of the cases we have investigation ahs resulted from any breach in any of Apple's systems including iCloud of Find my iPhone." 

Don't Miss: How Delta Bought A Refinery And Wound Up Saving Its Rivals A Ton Of Cash »

SEE ALSO: Company Confirms That Deceased Former US President Richard Nixon Is Not A JPMorgan Banker

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Company Confirms That Deceased Former US President Richard Nixon Is Not A Banker At JPMorgan (NUS, HLF)

Screen%20shot%202014 09 02%20at%203.20.27%20pm

Richard M. Nixon, the 37th President of the United States, does not work as an underwriter at JPMorgan.

However, someone named Richard M. Hixson does. 

In a filing with the SEC on Tuesday afternoon, Nu Skin said that following questions regarding its credit facility document, it found that the document in question contained, "an inadvertent typographical error on the signature page."

"The Amendment was signed by Richard M. Hixson, Senior Underwriter, JPMorgan Chase Bank, N.A., not Richard M. Nixon," the company said. "As previously disclosed, the JPMC Agreement expired pursuant to its terms on August 8, 2014, prior to which all amounts outstanding thereunder were repaid."

Arthur Burns and Richard Nixon

The disclosure from Nu Skin came after John Hempton of Bronte Capital uncovered the oddity in one of Nu Skin's credit agreements.

In a blog post published Tuesday, Hempton pointed out the unusual name listed on the document and began searching for answers.

Hempton scoured the web, turning up no Richard M. Nixon except for the former president — who passed away in 1994.

Hempton eventually called JPMorgan, but was unable to track down the employee in question: now, it seems, with good reason.

Nu Skin is a direct-selling company, like Herbalife, that sells anti-aging products. In early August, shares of the company fell more than 20% in one session after the company said its second quarter earnings and revenue would miss expectations. Shares of Nu Skin were down more than 5% on Tuesday.

Perhaps investors were spooked by the brief appearance of a ghost.

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