Dow: 12,722 (-0.79%) S&P 500: 1,351 (-0.89%)
Vacation season – a time for some to bask under the sun with exposed skin and their cocktail of choice. But don’t forget those left behind in the office crushing double-time…These folks were sipping triple-shots of espresso after the Dow plunged 250 points within minutes of opening today. During the morning’s global stock selloff, concerns over Spain’s ability to pay back its debt sent their bond yields soaring. Meanwhile, US government bond yields dropped to record lows as investors decided instead to place their cash in the safety of our Treasury Department. McDonald’s (MCD), the biggest firm reporting earnings today, missed on 2nd quarter profits, but by the end of the day the Dow managed to cut its losses to 101 points. No mas Spain, no mas (por favor)
Spanish “Regional Governments” show debt problems, Moody’s drops German credit outlook
On Friday, the Spanish state of Valencia hit US stocks after asking for bailout funds because it’s broke and investors will no longer lend to it. Inspired by their fellow province, 6 more Spanish “regional governments” requested aid today from the central government. Investors were extremely concerned, dropping demand for Spanish debt, which caused their government bond yields (the amount of return investors require to take on the risky debt) to spike to euro-era highs. By the way, after the market closed, credit ratings agency Moody’s lowered its credit outlook on Germany, the Netherlands and Luxembourg (a country with a disproportionately huge MarketSnacks fanbase) from “neutral” to “negative” – this isn’t a downgrade signaling difficulty repaying their debt, but a show of concern.
US Government borrowing rates fall to record low as investors seek safe investments
Due to further deterioration of the Spanish debt crisis, investors sold risky assets (stocks, oil, and other investments reliant on economic growth) and shifted to “safe havens” to protect their money. US government bonds (“Treasuries”) were bought by masses of investors who just want their money to be safe, and there is no more reliable borrower than the US. As prices rose on the high demand today, the yields, which reflect the borrowing costs for the US, fell to 1.39% today for 10-year bonds. That’s a record low, folks. Although it’s good that Washington will save money on interest payments, investors are flocking to Treasuries because they’re afraid of the economic situation. So the low Treasury yields are the result of worried investors and Treasury Secretary Tim Geithner is not celebrating this news.
- AT&T, UPS and Lockheed Martin report earnings, but all eyes will be on Apple (and many of those eyes will be doing so on an Apple product) – can AAPL set another quarterly earnings record? Analysts expect upward of $11 billion.
- Light on the econ data tomorrow (“May Home Prices” and the “June Regional Manufacturing Survey for Richmond, Virginia”)
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