U.S. Markets Tumble on Greece Euro Zone Exit Concerns

Tweet

The S&P 500 fell for a 6^th consecutive day on Friday on euro zone worries, and posted its worst week since November. On Friday, the S&P 500 fell 9.64 points or 0.74% to 1,295.22. The Dow lost 73.11 points or 0.59% to 12,369.38. For the week, the S&P 500 tumbled 4.3%, while the Dow fell 3.5%. The S&P 500 has fallen 7.3% so far in May.

Facebook Records Lackluster Performance After IPO

After its IPO on Friday, shares of Facebook initially rose 10% in early trading. However, it closed just 0.6% above its issue price of $38, at $38.23. The shares almost fell below the $38 level, but were supported by its underwriters.

16 Spanish Banks Downgraded as Euro Zone Concerns Spread

On Friday, Moody's downgraded 16 Spanish banks by 1 to 3 notches, as concerns about Greece spread to other PIIGS nations. Meanwhile, with the increasing threat of Greece leaving the euro zone, S&P downgraded Greece on Friday, from B- to CCC.

Spanish Debt Yields Hit Record Highs

On Thursday, Spain auctioned $2.5 billion of 3- and 4-year government bonds. The yield on the 4-year bonds was 5.106%, much higher than the 3.374% at the last auction. As a result, the yield on 10-year Spanish bonds rose to 6.38%, and its spread versus German debt rose to 500 basis points.

Greeks Rush To Withdraw Deposits from Banks

With the increasing threat of Greece leaving the euro zone, Greeks have been rushing to withdraw money from banks. On Monday, Greeks withdrew $700 million euros from Greek banks. The situation was similar on Tuesday. This caused the euro to fall to US$1.2688 on Wednesday, and the yield on Spanish 10-year debt to hit 6.51%.

Looking Ahead to Next Week

With the severity of the euro zone crisis increasing, markets will likely continue to fall until the situation in Greece is resolved, either with a temporary solution by the ECB/EU/IMF or through exiting the euro zone. G8 leaders have been meeting this weekend, and investors will look to see if there are any concrete measures announced next week. Meaningful action by the G8 would provide markets with a boost. Investors will also be looking at the German, French and euro zone PMIs to gauge the health of the euro zone economy. In addition, Germany's Ifo for business sentiment will shed light on the strength of Europe's leading economy.

 

U.S. Markets Fall For Second Week on Greece and Spain Concerns

Tweet

U.S. stocks fell for a second week in a row, as a $2 billion trading loss by JP Morgan and concerns about the political uncertainty in Greece and the stability of Spanish banks pulled markets lower. On Friday, the S&P 500 fell 4.60 points or 0.34% to 1,353.39. The Dow dropped 34.44 points or 0.27% to 12,820.60. For the week, the S&P 500 lost 1.1%, while the Dow dropped 1.7%.

JP Morgan Loses $2 Billion in 6 Weeks

On Friday, shares of JP Morgan Chase & Co tumbled 9.3% after revealing that the bank had lost $2 billion in 6 weeks on hedging positions involving the CDS Index. Investors became concerned that other U.S. banks would be affected, sending the KBW bank index down 1.2%.

U.S. Consumer Sentiment Surprises

On Friday, the Thomson Reuters/University of Michigan's consumer confidence index for May improved to 77.8 from April's 76.4. It was higher than the 76.2 that economists expected, and was a 4-year high.

Spain Nationalizes Fourth Largest Bank

On Thursday, Spain injected $4.5 billion euros into its fourth largest bank, Bankia, to take a 45% stake. This caused investors to become concerned about the health of Spanish banks, and whether further bailouts are needed.

Greece Political Turmoil Troubles Markets

Alexis Tsipras enters Greek Presidential Palace. Source: Associated Press

On Tuesday, after Greece's largest political party failed to form a government, the responsibility to do so fell to Alexis Tsipras and his Syriza party, the radical leftist party that seeks to overturn Greece's bailout agreement with the EU and IMF. As a result, concerns about Greece either exiting the euro zone or backing out of its agreement with the EU and IMF sent the Dow 150 points lower in early trading. German and French markets fell by 2% and 3% respectively, while the Greek market tumbled by 4%, reaching its lowest level in 20 years. The euro fell below the US$1.30 level, reaching US$1.2988.

Looking Ahead to Next Week

As I correctly forecasted last Sunday, U.S. markets fell this week on increasing uncertainty in the euro zone, especially the political crisis in Greece. Investors will continue to focus on the situation in Greece in the coming week. If the parties are unable to form a government, and the public heads into another election, markets will likely fall on the continued uncertainty. However, if a government is formed without the radical leftist Syriza party, markets will likely see a upward bounce. Meanwhile, investors will also pay attention to the banking system in Spain. If no other banks face trouble following the nationalization of Bankia, it would provide a boost to markets.

U.S. Markets Post Biggest Weekly Drop of 2012

Tweet

U.S. markets tumbled on Friday on a weaker-than-expected jobs report, and weak economic data from the euro zone. On Friday, the S&P 500 dropped 22.47 points or 1.61% to 1,369.10. The Dow tumbled 168.32 points or 1.27% to 13,038.27. For the week, the S&P 500 fell 2.4%, for its worst weekly performance in 2012.

Disappointing April Jobs Report

The jobs data responsible for Friday's market tumble was the U.S. April jobs report, which showed a gain of only 115,000 jobs. It was 55,000 less than the 170,000 jobs that economists expected. In addition, job gains decreased for the third month in a row. Even though the unemployment rate fell to 8.1%, it was due to 342,000 people giving up looking for work.

Euro Zone PMI Disappoints

On Friday, the Eurozone Services PMI from Markit showed a reading of 46.9 in April, which was significantly lower than the 49.2 in March. It indicated a deeper recession for the euro zone. In addition, France and Greece were heading into elections in the weekend, which added to the uncertainty in the markets.

Yields on Spanish Debt Remains Elevated

On Thursday, 3-year Spanish debt was auctioned at 4.037%, much higher than the 2.89% in the previous auction. Meanwhile, 5-year debt was auctioned between 4.752% and 4.960%, higher than the 4.319% previously.

ADP Shows Weak Private-Sector Hiring

On Wednesday, the ADP jobs report alluded to the disappointing April jobs numbers. The ADP report showed a gain of only 119,000 private-sector positions, much lower than the 177,000 the market expected. In addition, U.S. factory orders in March fell 1.5%, its biggest fall in 3 years. This caused the U.S. markets to open lower on Wednesday.

ISM Data Better Than Expected

Not all economic data this week was weaker-than-expected. On Tuesday, the April ISM reading was 54.8, better than the 53 the market expected. As a result, the Dow rose almost 100 points in early trading.

Looking Ahead to Next Week

Investors will be watching data from China next week, when the country releases inflation, retail and factory numbers. In addition, investors will pay attention to March readings on industrial output in Germany, France, Italy and Spain for a measure of how deep the euro zone recession will be.

Sunday's election defeat of Nicolas Sarkozy in France and the ruling parties in Greece will cause investors to become concerned about how determined the euro zone is in carrying out austerity measures. These election defeats will add to the uncertainty in the markets. With the disappointing jobs data from Friday continuing to weigh on markets, stocks will likely head lower in the beginning of next week. With earnings season winding down, investors will turn their focus back to the euro zone. With uncertainty in the euro zone increasing and what appears to be a deeper recession, U.S. markets will likely head lower next week.

 

S&P 500 Posts Best Week In One Month

Tweet

 U.S. markets rose on Friday on better-than-expected earnings from Amazon. The S&P 500 rose 3.38 points or 2.24% to 1,403.36. The Dow gained 23.69 points or 0.18% to 13,228.31. For the week, the S&P 500 gained 1.8% for its best week in a month, as strong corporate earnings overshadowed concerns about the euro zone. The S&P 500 also closed above the psychologically-important 1,400 level.

U.S. First Quarter Growth Disappoints

On Friday, the U.S. Commerce Department announced that first quarter GDP growth was 2.2%, which was lower than the 2.5% the market expected. However, it was higher than the 1.5% that economists expected at the beginning of the year, which prevented the market from falling on the news. On Thursday, U.S. initial jobless claims also disappointed the market, when it fell by only 1,000, to 388,000.

Spain Downgraded by S&P

On Friday, S&P announced that it is downgrading Spain's rating by two notches, from A to BBB+. S&P has also placed Spain's rating on negative watch, and stated that Spain's banking system was too reliant on government funding. Meanwhile, Italy's bond auctions disappointed investors, with the yield on its 10-year debt at 5.84%, which was 60 basis points above last month's auction.

Federal Reserve Reiterates Stance

On Wednesday, after the Fed's much-anticipated meeting, it announced it is continuing its stance of keeping interest rates at the current level until the end of 2014. However, it did not mention QE3.

UK Slips Into Double-Dip Recession

Also on Wednesday, the UK announced that first quarter GDP shrank by 0.2%, which was weaker than the 0.1% growth the market expected. With the negative 0.3% growth in the fourth quarter, the UK is now officially in a double-dip recession.

Apple Boosts Markets

On Wednesday, U.S. markets received a boost from Apple's earnings. The company's profits rose 94% from last year to $11.6 billion. EPS was $12.30, higher than the $9.94 the market expected.

Markets Tumble on Netherlands and France

On Monday, markets tumbled when the Prime Minister of the Netherlands resigned due to a disagreement in parliament over austerity measures. In addition, with the second round of federal elections in France about to get underway, investors faced a large degree of uncertainty. As a result, the yield on Spain's 10-year government bonds rose above 6%, and stock indices in Europe fell more than 1%.

Looking Ahead to Next Week

Investors will be paying close attention to the U.S. March jobs report on Friday. On Wednesday, the ADP jobs report will be announced. In addition, investors will continue to pay attention to corporate earnings. So far, 57% of S&P 500 companies have posted earnings. Next week, companies including Visa, Kraft and Prudential will be reporting results.

With the situation in Spain showing no signs of improvement, it will take stronger-than-expected earnings just to keep the market from falling. If the yield on Spanish debt rises, then the market will likely fall regardless of earnings results. With the UK now in a double-dip recession, it will likely conduct quantitative easing, which should boost the prices of gold and silver.

 

U.S. Stocks Post First Positive Week of April

Tweet

 U.S. markets rose slightly on Friday, as strong corporate earnings overcame worries about the euro zone. On Friday, the S&P 500 edged up 1.61 points or 0.12% to 1,378.53. The Dow rose 65.16 points or 0.50% to 13,029.26. For the week, the S&P 500 rose 0.6%, after falling in the two previous weeks.

Strong Results From Microsoft and IBM Boost Shares

On Friday, Microsoft posted better-than-expected results. Sales rose 6%, while earnings was $5.11 billion, which was better than what the market expected. As a result, shares rose 4% when markets opened the next day. Meanwhile, IBM posted earnings of $2.78, better than the $2.65 that analysts expected. In addition, the company raised its full-year earnings outlook.

Market Breaths Sign of Relief on Spanish Bond Auctions

On Thursday, markets breathed a sign of relief when 10-year Spanish bonds were sold at a yield of 5.743% at an auction, lower than the critical level of 6%. However, new data indicated that the effects of the LTRO are beginning to weaken.

Stocks Surge on Goldman Sachs Earnings and IMF Forecast

On Tuesday, the Dow rose almost 200 points, after Goldman Sachs and Coca Cola reported better-than-expected results. Goldman Sachs reported EPS of $3.92, better than what the market expected. In addition, the IMF raised its world economic growth forecast for 2012.

Spain Concerns Cloud Markets

On Monday, yields on Spain's 10-year government bonds rose above the critical level of 6%. In addition, Spain's 5-year CDS reached a record high. It was revealed that Spain's deputy finance minister has asked the ECB to buy Spanish debt to push down the yield. As a result, the euro fell below the US$1.30 level.

Looking Ahead to Next Week

Investors will continue to focus on earnings results next week, when 180 S&P 500 companies will be reporting. With the yield of Spanish government bonds near unsustainable levels, earnings will have to continue to beat expectations in order for the market to head higher. Even with strong earnings, stocks could head lower once earnings season is over, as the situation in the euro zone becomes the center of investor focus during a season that is traditionally weak for stocks.