Markets Again Fret About Europe

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 |  Includes: DIA, QQQ, SPY
by: Midnight Trader
  • Dow Jones Industrial Average down 160.83 (-1.28%) to 12,419.86
  • S&P 500 down 19.10 (-1.43%) to 1,313.32
  • Nasdaq Composite Index down 33.63 (-1.17%) to 2,837.36

GLOBAL SENTIMENT

  • Hang Seng Index down 1.92%
  • Shanghai China Composite Index down 0.21%
  • FTSE 100 down 1.74%

U.S. stocks struggled all day, finishing near their session lows as European debt worries re-asserted themselves after a one-day pause. Yields on Spanish government bonds widened to six-month highs while the yield on two-year, German government debt shrank to nearly zero after a credit agency further reduced its rating for Spanish debt issues, stoking new concerns the eurozone won't be able to contain its sovereign debt crisis. Pending home sales also unexpectedly fell in the U.S. during April, souring investor moods.

All 10 industry sectors in the S&P 500 are lower today, led by energy stocks after crude oil futures slid over 3% to finish at a seven month low below $88 a barrel. The financial sector also slumped as traders fretted over U.S. bank exposure to eurozone debt. The U.S. dollar rose sharply today against other currencies, also weighing on dollar-denominated commodities.

The National Association of Realtors this morning reported an unexpected 5.5% decline for its index of pending home sales, turning back budding confidence the housing sector was finding a bottom. The index jumped 4.1% in March with the analyst consensus calling for a 0.5% rise last month. Earlier, the Mortgage Bankers Association said purchase applications slid a seasonally adjusted 1.3% during the week ended May 25, snapping a three-week rise.

Stocks ground lower in in morning pre-trade and into the regular session as the European markets tracked lower, with worries about Spain keeping investors from moving into riskier assets. Egan Jones Ratings Co. last night downgraded Spain to B from BB-minus with a negative outlook, pushing the country's debt further into junk status.

Separately, the European Central Bank reportedly shot down the Spanish government's plan to recapitalize ailing lender Bankia SA using government debt. Yields on two-year German debt slid near zero at mid-day.

But New York Federal Reserve Bank President Bill Dudley today tried to rein in worries U.S. banks could be hurt by potential credit shocks from Europe, saying they are in better shape with greater capital and liquidity buffers now in place from a few years ago. He also said U.S. bank exposure to the eurozone periphery "is actually very modest," although he cautioned the U.S. would not be completely insulated from a crisis in Europe, particularly if banks stop lending out of a concern for counter-party risk.

In company news, Research In Motion (RIMM) finished down about 8%, earlier falling to a new 52-week low of $10.01 a share, after the maker of Blackberry smart phones warned of an operating loss during the Q1 ending later this week, its first negative quarter since 2004.

CEO Thorsten Heins said the company is being hurt by "the ongoing competitive environment impacting our business in the form of lower volumes and highly competitive pricing dynamics." He also said there will be "significant" spending and head count reductions during the year, adding RIMM has hired JPMorgan Securities and RBC Capital Markets to assist in evaluating strategic options.

There were late gains by Apple Inc. (NASDAQ:AAPL) - perhaps the rival most responsible for RIMM's recent slide - posting a modest 1.3% rise and providing a floor preventing steeper losses today for tech stocks.

Commodities ended mixed, with crude oil for July falling $2.94 to $87.82 a barrel. June gold rose $15 to finish at $1563.90 an ounce while July silver rose 24 cents to $27.99 an ounce. July copper fell 7 cents to $3.39.

UPSIDE MOVERS

(+) NEON, Bullish SeekingAlpha article sees stock a buyout candidate.

(+) OSIR, Gets Medicare, Medicaid pass-through status for Grafix.

DOWNSIDE MOVERS

(-) PBY Terminates merger deal.

(-) SURG Guides Q3 below Street view.