U.S. equity indexes and crude oil declined in early trading this week as fears of spreading contagion in the European Union sovereign debt crisis re-emerged.
Yields on the 10-year Spanish bond reached 7.5 percent, according to data provided by Bloomberg.
Investors are concerned more of Spain's regional governments may request bail outs as the nation struggles with recession.
The nearest delivery crude oil contract traded down over 4 percent.
Right now, the correction in risk sentiment appears to be a healthy correction, although, history suggests the Spring sell-off was just the beginning of what could be a larger decline.
I trimmed my exposure to the risk-on trade as declines may just be beginning. As sentiment improves, I'll increase my exposure. Or should sentiment continue to deteriorate, I'll reverse positions and become net short. U.S. equity indexes could decline 20 percent from their 2012 peak.
McDonald's (MCD) reported disappointing second-quarter earnings highlighting slowing economic growth.
Global comparable-store sales increased 3.7 percent with positive comparable sales in each geographic segment.
Revenue was flat compared with the prior year. Revenue was up 5 percent in constant currency.
Based on the press release, McDonald's had a decent quarter, although, the currency risk is highlighted in the quarter as a strong dollar weighed on McDonald's operating performance. I'll have to wait until the S.E.C. filing to fully evaluate the quarter.
Going forward, I think one of the major risks to McDonald's performance will be head winds from a strong dollar.
Markets Close Lower
The Dow Jones industrial average (DIA) and S&P 500 (SPY) closed down slightly less than one percent while the Nasdaq-100 closed down just over one percent. Crude oil closed down well over 3.5 percent with gold declining by roughly half of a percent. Bank of America (BAC) closed higher by over a quarter of a percent.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.