Spain Getting Ugly Again
Markets are lower around the globe this morning after Asian markets declined overnight and then news out of Spain that its Valencia region will seek govt. help to pay its obligations. Spain's 10-year yield is back above 7.0% and its stock market is down more than 5% today. Ouch.
The euro is breaking to new 2-year lows, pushing the dollar index higher. Commodities are weak. Oil prices have eased back to $91.25. Gold prices are lower to $1580, and silver and copper prices are lower as well.
There is no US economic data to mention today. But there were a large number of earnings reports last night and this morning. Today we are seeing more mixed results in terms of the reactions.
Stocks rising on earnings: GOOG, GDI, SNDK, GE, SLB
Stocks falling on earnings: CMG, COF, ISRG, MSFT, IDXX
The 10-year yield is back down to 1.45%. And the VIX is bouncing 7% to 16.56, which is still a pretty low absolute level.
Trading comment: While the market action has been seemingly more constructive lately, I have noted that the quality of the rally is a bit suspect as it has been led more by defensive stocks than classic growth stocks. That is often an indication of a fleeting rally as opposed to one that has legs. The wildcard has been the economic backdrop in the eurozone. While headlines out of the EU have been sparse lately, it won't take many more days like today for the wheels to come off the market again. Spain's stock market is now down -5.8% which is a huge plunge. And the spillover to Italy is creeping in. If the crisis heats up again I think it will put markets back on the defensive in a hurry. So we are going to have the push and pull between US corp earnings and the reaction in stocks vs. the macro backdrop out of Europe and the potential global slowdown.
KAM Advisors has long positions in GOOG