With a short skirt and high bond yields, Spain dances back into the news
Dow: 12,823 (-0.93%) S&P 500: 1,363 (-1.01%)
Hey, it was nice while it lasted. Three straight positive days in the markets gave us more green on our screens than the drought-ridden Midwest has seen sadly in months. For the first time this week, Europe showed its ugly face as worries over Spain yanked the Dow down 121 points, its first triple-digit level decline in 2 weeks. Second quarter corporate earnings continued to come in mixed, with financial stocks leading the decline after Bank of America failed to impress shareholders.
Investors re-focus attention on Spanish debt problems
After two weeks of scrutinizing the earnings of American corporates, investors seemed to forget Europe was a mess. Today headlines in Europe revealed an embarrassing bond auction by the Spanish government. Spain had to offer close-to-record-high yields of 7.28% to lure investors to buy their bonds (fancy IOUs). The Eurozone also took another step to bail out Spanish banks as the state of Valencia asked for bailout funds so they could continue feeding the bulls and the Spanish government increased their estimate of how much the economy would shrink by in 2013. This trifecta of evidence that Spain is falling lower freaked global investors to shift their money into safe-haven assets (U.S. (“Treasuries”) and German (“Bunds”) federal debt). In the eyes of investors, Spain is a significant risk of default, so they require the whopping 7.2% return to compensate for it.
GE, Google, Schlumberger beat earnings, Microsoft and Chipotle disappoint
As this 2nd week of earnings season closes, revenues continue to be uneven, but companies for the most part are topping analysts’ low expectations. General Electric (GE) and the world’s largest oil field service firm Schlumberger (SLB) both inched up as they beat forecasts and Google (GOOG) rallied 3% after increasing ad revenues outweighed losses from recently purchased Motorola. Microsoft (MSFT) slipped nearly 2% on its 1st quarterly loss since before the MarketSnacks bull in our logo was born – companies continue to buy its “Office” products, but Bill Gates’ grown baby suffered a $6.2B write-down on an ad agency it bought 5 years ago (too bad they can’t just press “Go Back” like on Internet Explorer). And we’re not sure exactly how this is possible given the amount of times we venture into Chipotle (CMG) – the MarketSnacks team has a tab going – but the burrito maker suffered the S&P 500′s biggest fall, losing 22% thanks to fewer customers (Ok, we admit it – we prefer “Gringo’s Burritos” all the way in Cairo, Egypt. Seriously – the best).
Bank earnings dragging the most this season
The Dow Jones Industrial Average tracks 30 major blue chip stocks and Bank of America (BAC) was its biggest downer today, falling 2.62% on earnings disappointment. The firm’s financial numbers topped what was expected of them, but investors weren’t impressed by BAC’s profit margins. Wall Street’s 5 biggest banks have now reported their earnings and have beaten forecasts for the first 2 quarters of 2012 – but it’s been their worst first half performance since 2008. Profits and morale are down as layoffs continue. Banks claim that low interest rates and turbulent stock markets are limiting the amount of bang they can get for their buck (but we assume it’s actually Bane’s attack on the Gotham Stock Exchange).
Next week:
- Who will win the Miss Corporate America beauty pageant? Two bombshell’s strut their stuff next week: Apple (AAPL) is expected to beat its own quarterly earnings record and Facebook (FB) announces earnings for the first time as a public company
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