Tuesday's upbeat mood only lasted one single trading day as the major averages reversed their direction Wednesday. The SP500 closed 1.43% lower at 1313.32 points. The Dow Jones Industrial Average and Nasdaq Composite lost 1.28% and 1.17% respectively.
The news from overseas was the usual, very bad. New polls in Greece suggested that the far left anti-austerity party SYRIZA takes the lead in the election over the New Democracy Party. A victory of the left party on the 17th of June would most likely imply that Greece is about to leave the Eurozone.
Furthermore Italy saw its 10-year government bond yields break above the 6% level again after the country raised 5.73 billion euros at bond prices below those trading in the market. Both Italian and Spanish bond yields were on the rise trading at 6.08% and 6.71%, respectively.
Furthermore European business confidence slumped from 92.9 in April to 90.6 in May, which came in far below expectations of 92.0 driven by a large fall in confidence in Italy and the Netherlands.
European equity markets ended the day down with losses surpassing the 2% mark in Italy and Spain.
Wall Street Opening
On the back of the negative sentiment in Europe, Wall Street opened the trading day down little over 1%. Macro-economic news from the US did not help either. Pending home sales fell 5.5% in April according to the National Association of Realtors. Home sales came in to their lowest level in four months, casting doubts about comments about a possible housing recovery. Economists were expecting home sales to increase by 0.1% on the month.
New York Federal Reserve Governer William Dudley held a speech telling that the underlying trend in US job growth remains positive despite a slowdown in March and April. According to the Governor no further auction by the FED is needed as the economy will gradually strengthen which will lead to a "gradual decline in unemployment". Downside risks are an escalation of the European Debt crisis and a combination of spending cuts and tax increases near the end of the year.
Continued worries across the future of the Eurozone resulted in a renewed drop in crude prices, now trading below the $90 mark after peaking at $110 in March. The decline is providing a relief for consumers as gasoline prices have fallen to $3.63 per gallon.
Shares of Research in Motion (RIMM) fell 8% to $10.35 after trading as low as $10 as the manufacturer of the BlackBerry announced it has hired bankers to explore its strategic options, which could include an entire sale of the company. While such comments usually trigger a rally, investors focused on the warnings for an operating loss in the first quarter of 2012. Analysts are also fearful about the company's ability to retain its most talented employees.
Sears Holdings (SHLD), the troubled retailer fell 9% to $52 per share after the International Council of Shopping Center cut its US same store sales forecast from 3% to 2% as weaker consumer confidence will lead to a slowdown in discretionary spending. Shares in the company, which is controlled by hedge fund manager Lampert, have fallen from $84 in March to $52 at the moment. Despite the significant pullback shares are still up 64% on the year.
Facebook (FB) ended with another loss of 2% closing at $28.19 after the stock traded with a $27 handle in the afternoon. Shares traded with a small plus in the morning but slipped away during the day as the losses in wider markets deepened. Shares continued slipping despite the fact that Wedbush remains bullish on the prospects for the company and maintained its $44 price target.
Disclosure: I am long RIMM.