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Today's Economist: An Occupy Wall Street Offshoot Has Its Day

Wall Street Down as Fiscal Impasse Drags On

After the market closed, futures indicated continued pressure after Fitch Ratings placed the United States' 'AAA' rating on rating watch negative, citing the debt ceiling gridlock.

"Although Fitch continues to believe that the debt ceiling will be raised soon, the political brinkmanship and reduced financing flexibility could increase the risk of a U.S. default," the rating agency wrote in a statement.

The move echoed a similar action by Standard & Poor's in August 2011, when the agency downgraded the U.S. credit rating because of political gridlock related to the debt ceiling.

Futures fell, with S&P 500 futures down 10.7 points, Dow Jones industrial average futures off 122 points and Nasdaq 100 futures down 7.5 points.

"The last time this sort of thing happened, the practical effect on markets wasn't significant. But this time, I don't know what the impact could be," said John Carey, portfolio manager at Pioneer Investment Management in Boston, which has about $200 billion in assets under management.

"At some point this will really start to matter, and if nothing else, it highlights the concern people have about the budgetary situation. It lets investors know that this kind of risk is on the horizon."

During Tuesday's session, traders held off making big bets given the political uncertainty, which overshadowed some key corporate earnings. Selling accelerated during the afternoon after Senator Richard Durbin said Senate negotiations had been suspended until House Speaker John Boehner can work out a fiscal plan that can proceed in the House of Representatives.

Losses were broad, with all 10 S&P 500 sectors falling on the day. Three-fourths of stocks traded on the New York Stock Exchange ended lower, while 68 percent of Nasdaq-listed shares fell.

The Dow Jones industrial average ended down 133.25 points, or 0.87 percent, at 15,168.01. The Standard & Poor's 500 Index was down 12.08 points, or 0.71 percent, at 1,698.06. The Nasdaq Composite Index was down 21.26 points, or 0.56 percent, at 3,794.01.

Despite the day's decline, the S&P remains above its key moving averages, which have been serving as support. The index is currently about 0.6 percent above its 14-day moving average.

Lawmakers have until October 17 to agree to extend the $16.7 trillion U.S. borrowing limit or the country will risk an unprecedented debt default. The White House and Senate rejected the House's latest offer, while Republican leaders also failed to get support for the plan from rank and file members within their party.

Markets have largely avoided steep losses on optimism that lawmakers would agree to end the partial government shutdown and raise the debt ceiling. At the same time, volatility has spiked as the deadline approaches with little obvious progress. The CBOE Volatility index jumped 16 percent and is up more than 40 percent over the past four weeks.

"The odds that there won't be a deal over the next month are near zero, but there is some chance we won't see something by the 17th. If that happens ... we could easily correct 3-5 percent," said Jim McDonald, who helps oversee $803 billion as chief investment strategist at Chicago-based Northern Trust Global Investments.

"While the market has climbed over the past two weeks," he added, "that would reverse if there was any real concern" about missing the deadline.

Among other assets, crude oil fell 1.5 percent, while gold, which is viewed as a safe haven, rose 0.7 percent.

The situation in Washington has driven trading lately, overshadowing the beginning of a busy week of earnings. Citigroup Inc reported weaker-than-expected results as the bank was hit by a double-digit drop in bond trading revenue for the quarter, sending its shares down 1.5 percent to $48.86.

Johnson & Johnson reported stronger-than-expected quarterly results on strong growth for its prescription drugs, while Coca-Cola Co reported revenue slightly under expectations.

J&J rose 0.1 percent to $89.93 while Coca-Cola fell 0.7 percent to $37.66. Both companies are Dow components.

Intel Corp shares reversed early gains and fell 0.9 percent after the market closed after it reported revenue that topped expectations. Yahoo Inc also lost its initial post-market gains, trading flat after its results, while CSX Corp held on to slight after-hour gains.

Shares of Teradata Corp fell 18.4 percent to $42.91, a day after the data analytics firm cut its full-year earnings forecast.

With 7 percent of S&P 500 companies having reported, 52.8 percent have reported profits that topped expectations, according to Thomson Reuters data, below the historical average of 63 percent. There have also been fewer companies beating revenue forecasts this quarter.

FedEx, the world's No. 2 package carrier, authorized a share repurchase program of up to 32 million of its outstanding shares of common stock, sending its shares up 4.1 percent to $120.08.

On the downside, J.C. Penney Co Inc sank 8.9 percent to $7.17 as a company spokesperson denied a market rumor that the department store chain had hired bankruptcy counsel. The stock has fallen 63 percent so far this year.

Data showed the pace of growth in New York state's manufacturing sector slipped this month to its slowest since May, but business optimism stayed strong.

(Editing by Nick Zieminski and Dan Grebler)

DealBook: New Fashion Runway: Wall Street

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Sunnier Data From China Lifts Wall Street Trading

The stock market moved sharply higher on Monday, with the Nasdaq composite index ending at its highest since September 2000, after upbeat data from China increased optimism about the health of the global economy.

Investor sentiment was also lifted by merger activity and easing concern about a potential American military strike on Syria.

The Standard & Poor’s 500-stock index closed higher for a fifth straight session, posting its best daily performance since Aug. 1, while all 10 S.& P. sectors ended higher. More than 70 percent of companies that trade on the New York Stock Exchange and Nasdaq exchange posted gains.

Basic materials shares led the day’s gains, rising 1.5 percent, after China’s August exports handily beat market expectations while consumer inflation there held steady. United States Steel shares jumped 66 cents, or 3.5 percent, to $19.53, while Alcoa rose 16 cents, or 2 percent, to $8.08.

“This is more proof that the Chinese government’s attempts to stabilize the country’s economy are helping, and that really got us up and running,” said Donald Selkin, chief market strategist at National Securities.

Equities added to their gains in afternoon trading as it appeared less likely that a resolution authorizing military strikes against Syria would be approved easily by Congress.

Geopolitical uncertainty related to Syria has been a major market driver in recent weeks, with investors especially concerned about the potential impact on the oil market.

Senator Harry Reid, Democrat of Nevada and the majority leader, scheduled a test vote for later this week, but it was unclear whether the measure would attract enough backing to clear anticipated procedural roadblocks.

“Every poll shows it would be very difficult for Obama to get authorization, and that might be enough to delay any action or at least make the action more cautious,” Mr. Selkin said. “Both of those would give the market a leg up.”

Separately, a Russian proposal to place Syria’s chemical weapons under international control was welcomed by the government in Damascus, which praised the Kremlin for seeking to “prevent American aggression.”

The Dow Jones industrial average rose 140.62 points, or 0.94 percent, to 15,063.12. The S.& P. 500 gained 16.54 points, or 1 percent, to 1,671.71. The Nasdaq picked up 46.17 points, or 1.26 percent, to 3,706.18.

Deal news gave a further lift to market confidence.

Koch Industries agreed to buy the electronic connectors maker Molex for about $7.2 billion.

Ares Management and the Canada Pension Plan Investment Board reached a deal to buy the privately owned luxury retailer Neiman Marcus for $6 billion.

Molex shares surged $9.29, or 31.7 percent, to $38.63 as the S.& P.’s top gainer.

Shares of home builders rallied as investors bet that the rise in mortgage rates was nearly over. Pulte Group stock added $1.16, or 7.5 percent, to $16.63.

In the bond market, interest rates eased. The price of the Treasury’s 10-year note rose 6/32, to 96 15/32, while its yield dipped to 2.91 percent, from 2.93 percent late Friday.

DealBook: Shoeshines Keep Wall Street in the Black (or Maybe Brown)

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Muriel Siebert, a Determined Trailblazer for Women on Wall Street, Dies at 84

Muriel Siebert, who became a legend on Wall Street as the first woman to buy a seat on the New York Stock Exchange and the first woman to head one of the exchange’s member firms, died on Saturday in Manhattan. She was 84.

The cause was complications of cancer, said Jane H. Macon, a friend and board member of Ms. Siebert’s firm, the Siebert Financial Corporation.

Ms. Siebert, known to all as Mickie, cultivated the same brash attitude that characterized Wall Street’s most successful men. She bought her seat on the exchange in 1967, but to her immense anger, she remained the only woman admitted to membership for almost a decade.

She was one of the pioneers in the discount brokerage field, as she transformed Muriel Siebert & Company (now a subsidiary of Siebert Financial) into a discount brokerage in 1975, on the first day that Big Board members were allowed to negotiate commissions.

She also was the first woman to be superintendent of banking for New York State, appointed by Gov. Hugh Carey in 1977. She served five years during a rocky time when banks were tottering and interest rates were skyrocketing.

Ms. Siebert was known, to her delight, as a scrapper who refused to acknowledge defeat. She donated millions of dollars from her brokerage and securities underwriting business to help other women get their start in business and finance.

When she was honored for her efforts in 1992, Ms. Siebert used the luncheon celebration to warn that it was still too soon for women to declare victory in the battle for equality on Wall Street.

“Firms are doing what they have to do, legally,” she said. “But women are coming into Wall Street in large numbers — and they still are not making partner and are not getting into the positions that lead to the executive suites. There’s still an old-boy network. You just have to keep fighting.”

She continued fighting the old-boy network all her life. She was one of the first women, in the early 1970s, to fight to end the sexist practices then prevalent in Manhattan social clubs, spurred by an experience she had at the Union League Club. She had arrived there for a board luncheon meeting of the Sales Executive Club and was not allowed in the elevator.

“I had to go through the kitchen and walk up the back stairs,” she recalled. She was so angry during the meeting that her male colleagues asked what was wrong. When the lunch was finished, they tried to take her down in the elevator with them. When she was again rebuffed, they joined her in walking down the stairs and through the kitchen.

That experience, and other similar episodes, led her to testify before government bodies about the discriminatory policies of many New York clubs. In time, women were permitted to become members. This was particularly important because of the deal-making and networking done at these clubs.

Ms. Siebert also successfully lobbied in 1987 to get a ladies’ room on the seventh floor of the New York Stock Exchange, near the entrance to the luncheon club she frequented. She accomplished this in her typical fashion. She warned the exchange’s chairman that if a ladies’ room was not on the floor by the end of the year, she would arrange for a portable toilet to be delivered. The room was installed, and women no longer had to trek down a flight of stairs.

She once explained her strategy for dealing with obstacles: “I put my head down and charge.”

Muriel Faye Siebert was born in Cleveland on Sept. 12, 1928, the second of two daughters of Irwin Siebert, a dentist, and his wife, Margaret. She attended Western Reserve University for two years but left in 1952 before graduating because her father became ill.

She came to New York in 1954, she once said, “with $500, a Studebaker and a dream.” She was hired as a $65-a-week trainee in the research department at Bache & Company.

“The way it worked, everybody who was already there got to give the new kid one of their junk industries,” she told The New York Times in 1992. “I got airlines, I got motion pictures — things nobody wanted in those days.”

Catherine Rampell contributed reporting.

This article has been revised to reflect the following correction:

Correction: August 27, 2013

An obituary on Monday about Muriel Siebert, the first woman to buy a seat on the New York Stock Exchange, using information from a spokeswoman, misstated Ms. Siebert’s age and year of birth. She was 84, not 80, and she was born on Sept. 12, 1928, not 1932. The error also appeared in the headline and in a front-page capsule summary. (Ms. Siebert had given her birth year as 1932 during her career.)

DealBook: Public Funds Take Control of Assets, Dodging Wall Street

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Wall Street Posts Worst Week Since June With Fed in Mind

All but one of the 10 S&P 500 sector indexes ended lower.

The stock of J.C. Penney Co. skidded 5.8 percent to $12.87 and ranked as the S&P 500's biggest percentage decliner. Bill Ackman, the company's top investor, urged the retailer's board on Friday to replace its chairman.

Richard Fisher, president of the Federal Reserve Bank of Dallas, reiterated late Thursday that the central bank will probably begin cutting back on its massive bond-buying stimulus next month, as long as economic data continues to improve.

The lack of clarity over the Fed's plans gave investors reason to pull a record $3.27 billion out of U.S.-based funds that hold Treasuries in the latest week ended August 7, data from Thomson Reuters' Lipper service showed on Thursday.

"People are looking ahead to the September FOMC meeting and the prospect that the Fed begins its long-awaited exit strategy," said Michael Sheldon, chief market strategist at RDM Financial, in Westport, Connecticut.

The Dow Jones industrial average dropped 72.81 points, or 0.47 percent, to end at 15,425.51. The Standard & Poor's 500 Index declined 6.06 points, or 0.36 percent, to 1,691.42. The Nasdaq Composite Index fell 9.02 points, or 0.25 percent, to close at 3,660.11.

For the week, stocks posted their biggest declines since mid-June. The Dow fell 1.5 percent, snapping a six-week string of gains. The S&P 500 dropped 1.1 percent for the week and the Nasdaq slid 0.8 percent.

A week ago, both the Dow and the S&P 500 ended at record closing highs.

Stocks extended losses late in the session. President Barack Obama said he will make a decision on the nomination for the Federal Reserve chairman in the fall. Fed Chairman Bernanke is expected to step down when his second four-year term ends on January 31.

Bernanke rattled markets in late May by saying the Fed would begin to ease back on its stimulus program once the economy shows some improvement.

While many investors are concerned that economic growth will stall without the Fed's help, stock prices have been supported by some strong earnings and encouraging data overseas.

The S&P 500 is up 18.6 percent for the year so far.

In China, industrial output rose more than expected, adding to a string of data that indicated the economy may be stabilizing after an extended period of tepid growth.

U.S. economic data showed wholesale inventories unexpectedly fell 0.2 percent in June, marking a second straight month of declines, versus expectations calling for a gain of 0.4 percent.

U.S.-listed shares of BlackBerry Ltd jumped 5.7 percent to $9.76 after Reuters reported that the Canadian smartphone maker was warming to the idea of going private, citing sources familiar with the situation.

Priceline.com Inc, rose 3.9 percent to $969.89 a day after the online travel company reported earnings that beat expectations and gave a strong outlook. Some analysts speculate the stock's price will cross $1,000 soon, which would be a first for a Standard & Poor's 500 stock.

Earnings season is winding down, with 446 companies in the S&P 500 having already reported. Of those, 68 percent have exceeded analysts' expectations, slightly above the 67 percent beat rate over the past four quarters, Thomson Reuters data showed.

Volume was roughly 5.3 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, below the average daily closing volume of about 6.36 billion this year.

Decliners slightly outnumbered advancers on the NYSE by a ratio of about 15 to 14. On the Nasdaq, about three stocks fell for every two that rose.

(Editing by Nick Zieminski and Jan Paschal)

Wall Street Rebounds to End Three-Day Drop as Microsoft Gains

The three major U.S. stock indexes shook off early losses as Microsoft shares climbed. The stock closed up 2.6 percent at $32.89 in heavy volume. The S&P information technology sector index rose 0.4 percent.

Shares of Tesla Motors Inc jumped 14.3 percent to $153.48 a day after the electric car maker posted an unexpected quarterly profit. The stock has been a major momentum favorite this year, up almost 350 percent in 2013.

"There definitely seems to be some big runners. Microsoft was up quite a bit," said Peter Jankovskis, co-chief investment officer of OakBrook Investments LLC in Lisle, Illinois.

"It could be people decided there are some bargains out there. It's kind of odd that we had a fair amount of this tapering talk the past few days. So I'm surprised in that regard that people have decided to step back in."

Stocks had inched lower much of this week, pulling back from last week's record levels, on concerns that the Federal Reserve will start to reduce its stimulus efforts this year as the economy recovers. Gains in equities have been closely linked to the Fed's stimulative policy, and many investors are worried that economic growth may stall without the Fed's intervention.

In the latest comments from a Fed official, Richard Fisher, president of the Federal Reserve Bank of Dallas, reiterated that the central bank will probably begin cutting back on its massive bond-buying stimulus next month, as long as economic data continues to improve.

The Dow Jones industrial average rose 27.65 points or 0.18 percent, to end at 15,498.32. The S&P 500 gained 6.57 points or 0.39 percent, to 1,697.48. The Nasdaq Composite Index added 15.115 points or 0.41 percent, to 3,669.124.

Volume was once again light, with about 5.81 billion shares traded on the New York Stock Exchange, the NYSE MKT and the Nasdaq, below the daily average of 6.35 billion. Volume has yet to climb above 6 billion for any trading day this week.

Groupon Inc shares soared 21.6 percent to $10.60. Late Wednesday, the online coupon company reported revenue that exceeded expectations and named its co-founder as chief executive.

JPMorgan Chase & Co was among the Dow's worst performers. The stock fell 0.9 percent to $54.83. JPMorgan Chase, which is the biggest U.S. bank ranked by assets, faces a criminal probe by the U.S. Department of Justice over sales of mortgage-backed securities.

Data showed U.S. weekly jobless claims rose less than expected to 333,000 in the latest week, while the four-week average fell to 335,500, its lowest level since before the recession in 2007 through 2009.

Orbitz Worldwide Inc, an online travel agency, reported higher-than-expected quarterly earnings as it sold more hotel and vacation packages, and forecast full-year revenue above analysts' estimates. Orbitz shares surged 36.7 percent to $12.62.

After the closing bell, Priceline.com shares rose 5.1 percent to $981.46 after the online travel agency said quarterly profit rose on improved hotel and car-rental reservations. The stock had ended regular trading at $933.75, up 0.7 percent ahead of its earnings.

Of 442 companies in the S&P 500 that had reported earnings through Thursday morning, Thomson Reuters data showed that 67 percent topped analysts' expectations, matching the beat rate over the past four quarters. In terms of revenue, 53.6 percent exceeded estimates, more than the 48 percent rate over the past four quarters, but below the 61 percent average since 2002.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of 2 to 1, while on the Nasdaq, three stocks rose for every two that fell.

(Editing by Jan Paschal)

Wall Street Closes Lower on Uncertainty After Fed Officials’ Views

Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, told Market News International in an interview that the Fed could begin trimming the size of the stimulus program as soon as September, but might wait longer if the expected economic growth in the year's second half fails to materialize.

Later in the session, Chicago Fed President Charles Evans echoed the sentiment when he said the central bank will probably decrease the program later this year and could do so as early as next month, depending on the economic data.

Fed officials "are all hedging themselves, which is why the market continues to just be a little bit confused and why it is going to churn," said Ken Polcari, director of the NYSE floor division at O'Neil Securities in New York.

"There is really no reason at the moment for the market to go higher because it is still too unclear."

One catalyst for Monday's downturn in the Dow and the S&P 500 was provided by Richard Fisher, president of the Federal Reserve Bank of Dallas. He said he supported scaling back the central bank's stimulus next month unless economic data takes a turn for the worse.

The S&P 500's decline on Tuesday was its biggest fall since June 24 as investors continued to take profits from the recent rally that drove the Dow Jones industrial average and the benchmark S&P to back-to-back record closing highs late last week.

The Dow Jones industrial average fell 93.39 points or 0.60 percent, to end at 15,518.74. The S&P 500 declined 9.77 points or 0.57 percent, to 1,697.37. The Nasdaq Composite dropped 27.182 points or 0.74 percent, to 3,665.77.

Earlier, the Dow fell as low as 15,473.40, while the S&P 500 touched a session low of 1,693.29, and the Nasdaq hit an intraday low of 3,654.672.

The S&P 500 has risen for five of the past six weeks, gaining more than 7 percent over that period.

Volume was light for the second straight day, with about 5.5 billion shares traded on the New York Stock Exchange, NYSE MKT and Nasdaq, below the daily average of 6.36 billion. The thin volume exaggerated the market's swings.

Monday marked the lowest volume for a full-day session so far this year. With major U.S. economic data like the nonfarm payrolls report and earnings from bellwethers out of the way, volume is expected to be light throughout the week.

Walt Disney Co posted a slightly higher quarterly profit that beat Wall Street's expectations, even though its movie studio earnings declined, in results released after the closing bell. Disney's stock fell 1 percent to $66.35 in extended-hours trading. The stock ended regular trading at $67.05, up 1.6 percent.

During the regular session, the biggest drag on the Dow was International Business Machines Corp. The stock dropped 2.3 percent to $190.99 after Credit Suisse cut its rating to "underperform" from "neutral," saying growth would be a challenge for IBM in the future. Credit Suisse also cut its price target on the Dow component by $25 to $175. IBM topped the list of the Dow's 10 worst-performing stocks.

Bank of America shares declined 1.1 percent to close at $14.64 after the U.S. Justice Department and the Securities and Exchange Commission filed civil lawsuits against the bank for what government lawyers said was a fraud on investors involving $850 million of residential mortgage-backed securities. The stock was among the Dow's 10 bottom performers.

The S&P financial index lost 0.9 percent.

Retailers' shares were among the day's biggest losers. American Eagle Outfitters shares tumbled 12 percent to $17.57 a day after the retailer said its second-quarter profit would be hurt by weak sales and margins. A number of analysts downgraded the stock. The S&P retail index slipped 0.4 percent.

Of the 418 companies in the S&P 500 that had reported earnings for the second quarter through Tuesday morning, Thomson Reuters data showed that 67.5 percent have topped analysts' expectations, in line with the average beat over the past four quarters. On the revenue side, the data showed that 54 percent have reported revenue above estimates, more than in the past four quarters but below the historical average.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 3 to 1, while on the Nasdaq, more than two stocks fell for every one that rose.

(Editing by Jan Paschal)

Wall Street Is Mostly Higher

The Standard & Poor’s 500-stock index briefly hit an intraday record high on Monday, led by bank and health care stocks and overcoming declines in consumer shares after McDonald’s reported disappointing earnings.

In afternoon trading, the S.& P. was off its high for the day, up 0.2 percent to 1,695 points. The Dow Jones industrial average was flat, and the Nasdaq composite was 0.3 percent higher.

Financials rose for the 10th day in the past 12, with Bank of America leading the group. U.S.-listed shares of UBS rose 3 percent after the Swiss bank said its second-quarter profit beat forecasts despite a charge to settle a United States lawsuit.

The S.& P. 500 is up more than 18 percent so far this year, reflecting investors’ attraction to equities. Recent data showed funds that hold United States stocks gained $16.96 billion in the week ended Wednesday, the most since June 2008.

“Investors do often chase rallies,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Ill. “It could be feeding on itself a little bit.”

McDonald’s, the world’s largest restaurant chain, reported weaker-than-expected net income and warned that full-year results would be “challenged” in the face of falling sales in Europe. Shares fell 2.6 percent.

A rise in metal prices boosted materials shares, with Newmont Mining up 5.6 percent to lead gains in the S.& P. materials sector. Spot gold and three-month copper touched one-month highs as the dollar weakened.

The PHLX housing sector index fell 0.8 percent after an unexpected drop in American home resales in June. The data also gave support to bets that the Federal Reserve will extend its rate of bond purchases to support the economy.

“Any type of softness in housing data puts expectations of a Fed taper on the back burner,” said Chad Morganlander, portfolio manager at Stifel, Nicolaus & Co in Florham Park, N.J.

Global markets were generally higher, as election results in Japan strengthened the hand of Prime Minister Shinzo Abe and his economic stimulus policies. The mood was also bolstered by a pledge from the Group of 20 nations on Saturday to adjust their stimulus policies with care and put growth before austerity in order to revive the global economy, which the bloc emphasized remained “too weak.”

The yen strengthened against the dollar and the euro, although that was seen as a temporary bump since the election result was viewed as likely to weaken the yen going forward.

Upbeat results from the Dutch electronics giant Philips and the Swiss Banks UBS and Julius Baer helped European shares shake off a lazy start; the FTSEurofirst 300 index closed 0.1 percent higher.

The euro was slightly higher, at $1.3191.

In Europe’s debt market, benchmark German Bund futures were little changed, while Portugal led gains in periphery euro zone bonds after a weekend move by its president to keep the country’s coalition government intact patched over its recent troubles.

United States crude oil lost $1.60, falling to $106.45 a barrel.

Fair Game: Trying to Pierce a Wall Street Fog

Not much has come out on the case since then, leading some participants in the market to wonder whether this is yet another matter the Justice Department has let slide. A Justice Department spokesman said its investigation was continuing.

Thankfully, though, we may yet learn what actually went on behind the scenes in this trillion-dollar market. Investigators for European regulators are hot on the trail and a handful of pension funds have recently filed two suits against the big banks dominating the swaps arena. These investors contend that they overpaid when they bought and sold the instruments — to the tune of billions each year — because of the banks’ control of the market.

On July 1, the antitrust division of the European Commission announced that its investigators had come to a “preliminary conclusion” that the banks and two entities controlled by them had infringed European antitrust rules. These entities colluded, the commission said, “to prevent exchanges from entering the credit derivatives business between 2006 and 2009.”

Credit default swaps were at the center of the financial crisis. These instruments allow holders of bonds or other debt to hedge their risks in those positions. But the swaps also let speculators bet on a debt issuer’s default. The swaps almost felled the American International Group, the insurance giant, and were embedded in some of the stinkiest mortgage securities ever wrought.

But the market for these swaps has been conducted in the shadows. Trades were made over-the-counter — between private parties and not on an exchange. This meant that participants’ positions were not disclosed to regulators.

Wall Street likes the fog of over-the-counter markets because the profits generated by executing customers’ trades in them are far greater than in more transparent arenas. Think of the way you might shop for a mortgage: if mortgage rates were not publicly available, it would be hard to know whether the rate one banker offered was competitive. Customers that dealt with only one banker on their credit default swaps almost certainly did not get the best prices.

The 13 banks under the microscope on credit default swaps include Bank of America Merrill Lynch, Goldman Sachs, JPMorgan Chase, Morgan Stanley and UBS. Two associated entities controlled by the big banks are also being scrutinized — the International Swaps and Derivatives Association, a lobbying organization, and Markit, a data service provider.

A spokeswoman for the European Commission declined to comment beyond the July 1 announcement of its preliminary conclusions. Now the banks can make their arguments to the commission. If the officials are not persuaded and find enough evidence of antitrust infringements by any of the entities, the commission said, it can impose a fine of up to 10 percent of a bank’s revenue.

The commission began its investigation in April 2011, two years after the Justice Department’s. The European inquiry focused on activities from 2006 to 2009 when two exchanges, the Deutsche Börse and the Chicago Mercantile Exchange, were trying to enter the credit derivatives business.

Both exchanges sought licenses and data from I.S.D.A. and Markit to begin trading futures contracts based on credit default swaps, the commission said. But it said that the banks that control both entities refused to provide licenses for exchange trading, and that several banks tried to shut out the exchanges by choosing another clearing house for trades, ICE Clear Europe, which they owned.

These activities may have delayed the development of exchange trading in these derivatives, the commission said. Investors’ costs are much higher in over-the-counter markets where spreads are wide between the prices they must pay to buy and sell. Trading on an exchange narrows those spreads. According to a 2012 study by Deloitte, for example, spreads between bids and offers on dividend swaps declined by 75 percent after they began trading on the Eurex exchange in 2008.

“There was no question the banks did not want the C.M.E. to make the market more liquid and transparent,” said one person briefed on the banks’ internal discussions who asked for anonymity because he was not authorized to speak publicly. “This was their cash cow, and they didn’t want to give it up.”

None of the banks would comment on either Europe’s investigation or on the recent lawsuits. Steven Kennedy, a spokesman for I.S.D.A., said it was cooperating with the commission. “I.S.D.A. is confident that it has acted properly at all times and has not infringed E.U. competition rules,” he added. He also said the allegations in the lawsuits were meritless.

A spokesman for the Markit Group did not return a phone call seeking comment.

The banks have pushed to keep the market for credit default swaps in the dark. Three years ago, the Dodd-Frank legislation aimed to bring more competition by pushing trading onto exchanges and swap execution facilities. Wall Street tried to beat back regulators’ efforts to write tough rules after the legislation’s lead. They won some and they lost some. For instance, dealers now have to report swap transactions to regulators.

There was a reason for the banks’ pushback: money. The Deloitte study cited a 2010 analysis by Citigroup showing that the big banks’ trading in over-the-counter derivatives generated revenue of $55 billion, or 37 percent of the total at these institutions. Such profits will fall as more swaps trade on swap execution facilities under the new rules.

THE pension fund of the Sheet Metal Workers Local 33 of Cleveland is among the investors who filed the lawsuits against the banks, I.S.D.A. and Markit.

“The antitrust laws are the Magna Carta of free enterprise,” said Christopher M. Burke, a lawyer at Scott & Scott in San Diego who represents the pension fund. “When you have markets that are not competitive, opaque and where market players don’t have access to the same information, the markets are not functioning in a competitive fashion. Those that have the information can take advantage of that fact and extract anticompetitive leverage over those that lack the information.”

Mr. Burke pointed out that a private lawsuit, like the pension fund’s, is one way to shed light on anticompetitive behavior. Another is government action. European antitrust laws, unlike those in the United States, allow authorities to pursue remedies for past behavior. That’s a powerful tool for pulling back the curtain on investor-unfriendly practices.

Fair Game: Trying to Pierce a Wall Street Fog

Not much has come out on the case since then, leading some participants in the market to wonder whether this is yet another matter the Justice Department has let slide. A Justice Department spokesman said its investigation was continuing.

Thankfully, though, we may yet learn what actually went on behind the scenes in this trillion-dollar market. Investigators for European regulators are hot on the trail and a handful of pension funds have recently filed two suits against the big banks dominating the swaps arena. These investors contend that they overpaid when they bought and sold the instruments — to the tune of billions each year — because of the banks’ control of the market.

On July 1, the antitrust division of the European Commission announced that its investigators had come to a “preliminary conclusion” that the banks and two entities controlled by them had infringed European antitrust rules. These entities colluded, the commission said, “to prevent exchanges from entering the credit derivatives business between 2006 and 2009.”

Credit default swaps were at the center of the financial crisis. These instruments allow holders of bonds or other debt to hedge their risks in those positions. But the swaps also let speculators bet on a debt issuer’s default. The swaps almost felled the American International Group, the insurance giant, and were embedded in some of the stinkiest mortgage securities ever wrought.

But the market for these swaps has been conducted in the shadows. Trades were made over-the-counter — between private parties and not on an exchange. This meant that participants’ positions were not disclosed to regulators.

Wall Street likes the fog of over-the-counter markets because the profits generated by executing customers’ trades in them are far greater than in more transparent arenas. Think of the way you might shop for a mortgage: if mortgage rates were not publicly available, it would be hard to know whether the rate one banker offered was competitive. Customers that dealt with only one banker on their credit default swaps almost certainly did not get the best prices.

The 13 banks under the microscope on credit default swaps include Bank of America Merrill Lynch, Goldman Sachs, JPMorgan Chase, Morgan Stanley and UBS. Two associated entities controlled by the big banks are also being scrutinized — the International Swaps and Derivatives Association, a lobbying organization, and Markit, a data service provider.

A spokeswoman for the European Commission declined to comment beyond the July 1 announcement of its preliminary conclusions. Now the banks can make their arguments to the commission. If the officials are not persuaded and find enough evidence of antitrust infringements by any of the entities, the commission said, it can impose a fine of up to 10 percent of a bank’s revenue.

The commission began its investigation in April 2011, two years after the Justice Department’s. The European inquiry focused on activities from 2006 to 2009 when two exchanges, the Deutsche Börse and the Chicago Mercantile Exchange, were trying to enter the credit derivatives business.

Both exchanges sought licenses and data from I.S.D.A. and Markit to begin trading futures contracts based on credit default swaps, the commission said. But it said that the banks that control both entities refused to provide licenses for exchange trading, and that several banks tried to shut out the exchanges by choosing another clearing house for trades, ICE Clear Europe, which they owned.

These activities may have delayed the development of exchange trading in these derivatives, the commission said. Investors’ costs are much higher in over-the-counter markets where spreads are wide between the prices they must pay to buy and sell. Trading on an exchange narrows those spreads. According to a 2012 study by Deloitte, for example, spreads between bids and offers on dividend swaps declined by 75 percent after they began trading on the Eurex exchange in 2008.

“There was no question the banks did not want the C.M.E. to make the market more liquid and transparent,” said one person briefed on the banks’ internal discussions who asked for anonymity because he was not authorized to speak publicly. “This was their cash cow, and they didn’t want to give it up.”

None of the banks would comment on either Europe’s investigation or on the recent lawsuits. Steven Kennedy, a spokesman for I.S.D.A., said it was cooperating with the commission. “I.S.D.A. is confident that it has acted properly at all times and has not infringed E.U. competition rules,” he added. He also said the allegations in the lawsuits were meritless.

A spokesman for the Markit Group did not return a phone call seeking comment.

The banks have pushed to keep the market for credit default swaps in the dark. Three years ago, the Dodd-Frank legislation aimed to bring more competition by pushing trading onto exchanges and swap execution facilities. Wall Street tried to beat back regulators’ efforts to write tough rules after the legislation’s lead. They won some and they lost some. For instance, dealers now have to report swap transactions to regulators.

There was a reason for the banks’ pushback: money. The Deloitte study cited a 2010 analysis by Citigroup showing that the big banks’ trading in over-the-counter derivatives generated revenue of $55 billion, or 37 percent of the total at these institutions. Such profits will fall as more swaps trade on swap execution facilities under the new rules.

THE pension fund of the Sheet Metal Workers Local 33 of Cleveland is among the investors who filed the lawsuits against the banks, I.S.D.A. and Markit.

“The antitrust laws are the Magna Carta of free enterprise,” said Christopher M. Burke, a lawyer at Scott & Scott in San Diego who represents the pension fund. “When you have markets that are not competitive, opaque and where market players don’t have access to the same information, the markets are not functioning in a competitive fashion. Those that have the information can take advantage of that fact and extract anticompetitive leverage over those that lack the information.”

Mr. Burke pointed out that a private lawsuit, like the pension fund’s, is one way to shed light on anticompetitive behavior. Another is government action. European antitrust laws, unlike those in the United States, allow authorities to pursue remedies for past behavior. That’s a powerful tool for pulling back the curtain on investor-unfriendly practices.

Wall Street Mostly Flat at Close

It was another high day on Wall Street — barely.

After spending most of Friday flat or down, stocks rallied at the last minute and closed slightly higher, just enough to post new nominal highs for the Dow Jones industrial average and the Standard & Poor’s 500-stock index.

The gains were tiny. And the new high, which does not account for inflation, means little to investors, who hardly have more money now than they did a day earlier. But it is a sign that investors believe that the market’s rally this year may not be over yet.

The S.& P. 500 has closed higher seven days in a row. The last time it did that was in March.

Investors had to look past a pessimistic forecast from United Parcel Service, which said it was expecting a slowdown in United States industry. And in the afternoon, Boeing shares slipped after one of the company’s 787 jets had a fire in London, reviving fears of the troubles that the plane had with batteries this year.

Other economic news was mixed. Profits at Wells Fargo and JPMorgan Chase were better than expected, and that helped financial stocks. But a University of Michigan measure of consumer sentiment came in lower than expected for this month.

Investors will get a lot more information next week, when major reports on inflation and retail sales are due. That is also when the pace of company earnings reports will pick up sharply. Results are due from the remaining big banks, as well as General Electric, Intel, Microsoft and other industry bellwethers.

The Dow closed up 3.38 points, just 0.02 percent, at 15,464.30. The Standard & Poor’s 500-stock index rose 5.17 points, or 0.3 percent, to 1,680.19. Both indexes also closed at nominal highs on Thursday.

The Nasdaq composite edged up 21.78 points, or 0.6 percent, to 3,600.08. It is still well short of its record high of 5,048, set in March 2000.

All the big indexes ended the week ahead 2 percent or more.

In government bonds, the benchmark 10-year Treasury note fell 5/32 to 92 24/32, sending the yield up to 2.59 percent, from 2.57 percent late Thursday.

Shares in U.P.S. sank $5.33, or 5.8 percent, to $86.12 after the company said its second-quarter and full-year earnings would be less than analysts had projected because the company’s customers were using cheaper shipping options. U.P.S. also said it was seeing a slowdown in American industry.

FedEx shares fell, too, down $2.11, or 2 percent, to $102.29.

Cost-cutting lifted profits at Wells Fargo, and its stock rose 74 cents, or 1.8 percent, to $42.63. JPMorgan Chase reported a 32 percent jump in profits, but its stock fell 17 cents to $54.97.

Anthony Conroy, managing director and head trader for the ConvergEx Group, said JPMorgan’s credit numbers were strong. “That means the consumer’s out there spending and borrowing and propping up the whole economy, and that’s a good thing,” he said.

Mr. Conroy said he expected stocks to rise as long as second-quarter earnings reports at least matched the low expectations that investors have. “The three most important things in the next couple of weeks are earnings, earnings and earnings,” he said.

DealBook: The Essential Wall Street Summer Reading List

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Stocks Sag on Wall Street

Stocks fell sharply Monday on Wall Street on concerns that the Federal Reserve’s stimulus may be drawing to a close and a cash squeeze in China could further slow growth.

At the close, the Dow Jones industrial average was off 139.84, or 0.9 percent, to 14,659.56. The broader Standard & Poor’s 500-stock index was down 1.2 percent, and the Nasdaq composite fell 1.1 percent.

Earlier in the session, the Dow was down more than 200 points.

European and Asian shares also slumped.

Banking shares in China tumbled to their biggest daily loss in almost four years after the People’s Bank of China, the country’s central bank, said lenders needed to do a better job of managing their cash and loans. The central bank is trying to move China, the world’s second largest economy, away from credit-driven investment.

The S.&P. 500 has fallen 3.5 percent in June, and is on track for its worst monthly performance since May 2012.

“We are starting to see that follow through in Asia, which is all part of the broader narrative — the focus on a lack of stimulus, a creeping higher in rates and the potential impact for less liquidity globally,” said Peter Kenny, chief market strategist at Knight Capital in Jersey City. “This underscores the power and the importance of Fed policy to global central banking.”

The shift out of assets that have benefited most from cheap money has been sharpest in the United States debt market, where yields on 10-year Treasury notes hit 2.6 percent on Monday, its highest level since August 2011.

This rise in rates and the brighter outlook for the American economy, which was behind the Fed’s decision, has favored the dollar against most major currencies. The dollar index was up 0.3 percent at 82.57 points on Monday, building on last week’s 2.2 percent rally, its biggest weekly gain in 19 months.

Against the yen, the dollar was down 0.1 percent to 97.80 yen, while euro fell 0.2 percent to $1.3099, a level not seen since June 6.

Tenet Healthcare, a hospital operator, said it would buy smaller rival Vanguard Health Systems for $4.3 billion, or $21 per share including debt, to expand into new geographies. Vanguard shares jumped 67 percent and Tenet gained 4.5 percent.

Rising interest rates served to dent gold prices, weighing on mining stocks, while other commodities were also pressured by strength in the dollar.

Freeport McMoRan Copper and Gold has restarted some operations at the world’s second-biggest copper mine after receiving approval from the Indonesian government. Freeport shares shed 4.8 percent.

European equity markets remained weak despite data showing German business morale picking up for a second straight month in June, pointing to a slow recovery for Europe’s largest economy. The Euro Stoxx 50 of euro zone blue chips closed down 1.5 percent, and the FTSE 100 in London lost 1.4 percent.

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Indexes Swing on Wall Street

Stock indexes closed mostly higher in a volatile Friday session after two days of sharp declines, as investors grappled with the changing outlook for the Federal Reserve’s monetary policy.

By the end of trading the Standard & Poor’s 500-share index and the Dow Jones industrial average had both gained 0.3 percent, and the Nasdaq composite was 0.2 percent lower.

The Nasdaq was pressured by Oracle shares, which dropped 9.2 percent a day after the company missed expectations for software sales and subscriptions for a second straight quarter.

The yield on the 10-year Treasury note rose to 2.535 percent, up from 2.421 percent late Thursday. For the week, the 10-year yield was up 40.57 basis points as of 4:14 p.m. Eastern time, which would be the largest single-week rise for the 10-year since early March 2003, according to Reuters data.

Volatility has spiked since May 22 when the Fed chairman, Ben S. Bernanke, first hinted that the Fed may begin to rein in its stimulus measures, and is expected to continue.

Facebook shares rose 2.6 percent. UBS raised its rating on the stock to buy from neutral.

China’s central bank faced down the country’s cash-hungry banks on Friday, letting interest rates spike as it increased pressure on banks to curb rampant informal lending and speculative trading. Some worry that its approach could backfire, creating the potential for defaults and gridlock in the money markets of the world’s second-largest economy.