Courtesy of John Nyaradi.
Bad News Bears Crush Markets
The bears took control today as a slew of extremely negative economic reports crushed US Markets. The SPDR S&P 500 ETF (NYSEARCA:SPY) lost 2.07%, the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) lost 1.82%, the PowerShares QQQ Trust Series 1 ETF (NASDAQ:QQQ) lost 2.46%, and the iShares Russell 2000 Index ETF (NYSEARCA:IWM) topped off the beating with a 2.48% decline.
Not only did Dr. Ben continue to withhold his punchbowl yesterday (which was not well accepted), but today’s Bad News Buffet of Economic Reports put a serious damper on today’s trading. To start, initial unemployment claims decreased by only .05% this week (dismal for a recovery), while the Philly Fed’s Business Outlook Survey declined from -5.8 to -16.6, with any number above “0″ indicating economic expansion. So, according to the Philly Fed Business Outlook Survey, we are 16.6 points away from any form of economic growth. Meanwhile, the Philly Fed’s awesome stat is further backed by the National Association of Realtors Existing Home Sales Report, which indicated a 1.5% decrease in home sales in May compared to April. All in all, a Bad News Buffet in terms of economic reports.
Although the not-so-good economic reports likely dampened today’s markets, reports from abroad indicated that Spanish banks may need between 60-80 billion Euros if all hell breaks loose. That’s a lot of cash for just Spain’s financial sector and does not even include what the Spanish Government would possibly need to stay solvent. Although Spanish 10 year bond yields dropped slightly today to 6.47%, the writing still remains on the wall for the debt stricken continent. Couple bad news in Europe with slowing Chinese Manufacturing PMI reports, and we might as well call Thursday a bad day.
In other news, our friend oil has fallen below $80 per barrel and its oil ETF counterpart (NYSEARCA:USO), lost 3.39%. Do you remember the last time oil fell to below $80 per barrel? Last October rings a bell, right when Greece was the center of attention and Europe almost imploded. Have things really changed that much since then?
Bottom Line: All in all, today’s market declines were likely a realization by investors worldwide that markets are indeed addicted to the “Old Prof” Bernanke’s tasty punch otherwise known as quantitative easing. Since Dr. Bernanke did not refill the punchbowl, markets sneezed. Unfortunately too, the economy is currently bad news bears.
Click here to learn more about John’s book and for a free membership to Wall Street Sector Selector
