Bret Jensen's  Instablog

Reality hit the market on Monday and Tuesday as events in Europe and the aftermath of the dismal jobs report on Friday. The S&P and NASDAQ both have lost more than 2% so far this week. Given the disappointing earnings reports after hours, the rest of the week is not lining up well. Here are 10 negative items from the first two days of the week that are likely to affect trading Tuesday and the week ahead.

1.       The market has finally woke up over the past two days to the fact that the European debt crisis might extend past Greece, Ireland and Portugal. The last few months have reminded me of the scene in Monty Python and The Holy Grail when John Cleese is running across a meadow in full charge. Two guards at the castle are watching this for what seems like an eternity. The charging knight always seems a thousand yards off in the distance until he is fully upon the guards. It seems the problems in Italy were out there for months for anyone to see, it’s hard to fathom the market being so surprised by the obvious.

2.       If that wasn’t bad enough, Spain’s problems are even more problematic than what the market is pricing in. online.wsj.com/article/SB10001424052702303678704576439781802458052.html

3.       Bank of America concerned the market that it may need to raise additional equity due to settlements and losses which was one of the drivers of the financial sector losing over 2.7% Monday. online.wsj.com/article/SB10001424052702303678704576440174275159838.html

4.       Debt ceiling talks are stalling as both parties have painted themselves into the corner. This could have a disruptive impact on the market if not resolved in the next ten days. www.cnn.com/2011/OPINION/07/11/gergen.debt.crisis/index.html

5.       Investment banks are expected to report revenues are down 25% in the quarter which speaks to weakness of the overall credit and underwriting markets and will lead to further job losses among their well heeled flock.www.boston.com/business/articles/2011/07/11/banks_expected_to_report_revenue_drop/

6.       Rail car traffic showed anemic growth in June. Not exactly the harbinger of robust economic growth. calculatedriskblog.com/2011/07/aar-rail-...

7.       Doug Kass came out Monday and advised to sell stocks as investor opinion is much too bullish and the risk/reward is not favorable. www.thestreet.com/story/11179922/2/kass-sell-stocks.html

8.       Good story in the Times Monday on the headwinds from the expiration of government support hits the unemployed and other vulnerable segments of society, which will impact consumer spending. nytimes.com/2011/07/11/business/economy/...

9.       The latest small business survey shows little new hiring plans. Given small businesses provide the majority of new jobs, this does bode well for job growth for the rest of the year. online.wsj.com/article/SB10001424052702303812104576437853543049480.html

10.   After hours, on Monday earnings guidance from Novellus and Microchip Technology were disapointing that led to major losses for both stocks on Tuesday. Electronic Arts purchase of PopTops is likely to depress that technology stock on Wednesday.

Be Careful out there.  The summer is going to be a roller coaster