Stock Market News for Feb 23, 2011 - Market News - Applied Mat (NASDAQ:AMAT), BHP Group (NYSE:BHP)

The fear gauge Volatility Index (VIX) surged to its highest level since May last year and benchmark indices suffered sharp declines on Tuesday. Unrest in the Middle East and North Africa continued as immediately after the overthrow of leaders in Egypt and Tunisia, demonstrators in Bahrain, Libya and Algeria put forward similar demands. Libya has the largest oil reserves in Africa and Bahrain is next only to Saudi Arabia when it comes to oil reserves. The situation has sparked concern over oil prices and crude prices surged to their highest level in 2.5 years. The trend of rising markets now seems to be suffering a setback.

On Tuesday, the Dow fell 1.44% and closed at 12,212.79. The S&P 500 was down 2.05% to 1,315.44 and the Nasdaq closed at 2,756.44, down 2.74%. The CBOE Volatility Index (VIX) surged 26.6% to 20.80, its highest one day jump since May 20, 2010 primarily due to the Libyan situation and investors shunning risky asset classes. On the New York Stock Exchange, breadth of the market was on the negative side with 2,715 stocks declining for every 351 stocks that rose. Volumes for the day clocked the highest level for the month and the second highest for the year.

A resolution seems far off in Libya which produces about 2% of the world's daily crude output as the demonstrators' demand for the resignation of the country's leader faced a challenge from Colonel Moammar Gaddafi himself. Reportedly, more than 200 protestors have died in Libya and Gaddafi is ready to battle it out with demonstrators. Appearing on television, he said: "I am not going to leave this land, I will die here as a martyr". He vowed to fight ‘till the end'. Colonel Gaddafi asked his supporters to take to the streets and cleanse Libya “house by house”.

Meanwhile, Saudi Arabia's oil minister Ali Naimi announced measures to ease concerns over crude output amidst the rising tension. He said the Organization of Petroleum Exporting Countries would take measures to step up production should any shortage of supply arise. He also said in a news conference that there are concerns, but there is no shortage.

On the domestic front, the Conference Board reported that US consumer confidence had risen over the month to a 3-year high. The index of consumer sentiment increased to 70.4 in February from 64.8 last month. The Case-Shiller Home Price Index posted a 2.4% drop in the 20 city index and a 1.2% decline in the 10 city index.

Investors, in general, sold off high liquidity technology stocks. Nvidia NVDA, MEMC Electronics Materials WFR, Micron Tech MU and Applied Materials AMAT lost 9.44%, 6.51%, 6.67% and 4.89%, respectively. However, oil companies gained as crude prices surged. Shares of Chevron CVX and Exxon Mobil Corp XOM edged up 1.62% and 1.11% respectively.

In earnings news, Macy's M fell 1.22% though it reported a higher profit on rising holiday sales and expects increases in sales and profits to continue for the year. Home Depot HD was down 1.01% despite reporting a better-than-expected result, a reflection that skepticism among analysts remain. S&P Equity lowered its rating for the stock from Hold to Sell. Wal-Mart WMT dropped 3.09% after reporting its seventh straight quarterly drop in US sales.

On the mergers and acquisition front, BHP Billiton BHP said it plans to buy shale gas reserves from Chesapeake Energy CHK for an estimated $4.75 billion. Shares of BHP dropped marginally by 0.30% and CHK gained 5.19%. Forest Laboratories FRX agreed to buy Clinical Data CLDA for $1.2 billion in order to add to its portfolio of drugs to treat depression.

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