Markets around the world were sharply lower today after
posting strong gains yesterday. The Dow,
S&P and Nasdaq were down 1% as European woes and Spanish debt concerns
dominated the headlines. Concern over
when Spanish banks may need a bailout sent Spanish government bond yields
soaring to euro-era highs. The European
Central Bank came out with a statement rejecting the claims of a Financial
Times report Tuesday that the central bank had no plans to recapitalize Spain’s
Bankia S.A. The ECB reported that was
not true and they had not spoken with government officials yet. Spain’s government did say however that it
plans to pay for the 19 billion euro bailout of Bankia S.A. with cash it hopes
to raise through a treasury auction. To
add to the concern, independent credit-rating firm Egan-Jones downgraded Spain’s
credit rating to B from BB-. European
stocks were down between 1.5% and 2.0%.
In the US, investors took their cues from Europe, selling shares and
flocking to safe havens. On the economic
front, the index of pending home re-sales dropped 5.5% in April according to
the National Association of Realtors. After
a 3.8% gain in March, April’s report hints at an uneven recovery in the
housing market. Asian shares also were
down as hopes for an aggressive Chinese stimulus waned and worries over Spain
added to the selloff. Oil prices fell
2.96% to 88.09 per barrel on supply issues, and gold fell 0.66% to 1541. The US dollar strengthened as investors reached
for the safety of the greenback. 10 yr.
treasury yields slipped 9.7 basis points to 1.65% and 30 yr. mortgage rates
fell slightly to 3.78%. The volatility
index (VIX) rose 10.51% to 23.24 at 7:52 am pacific.
