Dow 12,420 (-1.28%) S&P 1,313 (-1.43%)
After yesterday’s market jump on news that the pro-euro parties were leading in Greek political polling, another European country quickly jumped onto investors’ Bloomberg terminals and pushed Europe’s debt crisis to (by some measures) its worst levels yet. Spanish bonds yields hit record highs on bank failure concerns while US yields hit all-time lows in today’s trading. Although American housing data implied that market still hasn’t stabilized and there may be room for prices to continue to fall, investors had their eyes glued to reports on the Spanish banking fiasco, and the Dow dropped 161 points in a nerve-wracking day.
Spanish bank woes push bond yields to record high, investors rush to safe havens
Just days after we learned one of Spain’s largest banks needed a $24 billion bailout from the government, the European Central Bank reported that bank deposits are shrinking as Spanish businesses and citizens lose faith in the financial system. The plight of Spanish banks seems more perilous every dios, reinforcing fears that their economy is years from recovery. Without healthy banks to lend to businesses, an economy is handcuffed and cannot grow. Investors shifted funds from risky investments (stocks) to safe havens, namely US government bonds (“Treasurys”). The allure of a safe investment is so great right now that investors are accepting low 1.63% yields for 10-year Treasurys (this is a historically low yield, or return, that the bondholder will receive for owning American debt). Meanwhile investors won’t touch Spanish bonds with a 50-meter pole, pushing their bonds to hit a record high yield of 6.67% to attract buyers.
Apple rises on iTV rumors, Facebook and Research in Motion drop again
All eyes were on tech stocks, the largest sector of companies represented in the S&P 500 stock index. Apple (AAPL) gained 1.21% after CEO Tim Cook discussed his “intense interest” in TV and moving more Apple manufacturing to the US at the “AllThingsD” tech conference in CA (investors jump on Apple rumors like teenage boys to the SI Swimsuit Edition pre-internet). After dropping 9% yesterday on its 1st day in the options market, Facebook (FB) dipped 2.25% as sophisticated derivatives traders use options to bet shares will fall even further (FB has lost 25% since its botched $38 IPO debut). And Research in Motion (RIMM) dove 7.83% after reporting an unexpected 1st quarter loss and hiring lawyers & bankers to discuss turnaround options. Blackberry still has 78 million users globally and will be unveiling the “BlackBerry 10″ operating system soon, but analysts foresee too much competition.
- A big day of May econ data. Eat your Wheaties….
- ADP May jobs report – the preliminary reading before Friday’s key Labor Department employment report is expected to show 150,000 jobs added last month.
- Revised 1st Quarter GDP numbers – the US gross domestic product is expected to be adjusted to just under 2% growth.
- Weekly Jobless Claims – the number of Americans filing for unemployment since last week is expected to remain flat at 370,000….
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