Market Talk

Tell me when it's over.

An already bitter month for US stocks ends on a sour note as markets turn sharply lower in the final minutes. The tone was soft all day, but declines picked up in early afternoon after Fitch nicked Spain’s credit rating.

That took the wind out of the euro, which had recently found some footing. All the strongest sectors in yesterday’s rally flip to the worst performers today — financials, energy, materials and industrials. Defensive utilities, consumer staples and health-care fare best. IBM, 3M, Boeing, Exxon and CAT lead the Dow’s dollar decliners. Coke, P&G and Merck the averages only gainers.

DJIA falls 122.36 to 10136.63, and Nasdaq Comp sheds 20.64 to 2257.04. S&P 500 ends 13.65 lower at 1089.41.

Dow Industrials tumble 871.98 points, of 7.9% in May, and break a string of three straight monthly gains. It’s the worst May point drop ever, and worst percentage decline since 1940. For the S&P 500, it’s the worst May point drop ever (97.28) and worst percentage drop (8.3%) since 1962. For both indexes, it was the worst percentage drop since February 2009. For S&P 500, it was the worst monthly point drop since October 2008.

- Several big name hedge-fund managers are placing bullish bets on Citi (C) and Bank of America (BAC). “Paulson, Soros, Falcone, Tepper, Ackman, Ainslie, Loeb — you name it, they own one or the other…or both,” Joshua Brown writes at The Reformed Broker. “And they own them in size.” But why the sudden interest?

- Goldman Sachs (GS) may be on the verge of resolving SEC’s fraud charge by agreeing to a settlement worth hundreds of millions of dollars, according to FT. But FusionIQ CEO Barry Ritholtz is still perplexed why GS chose to fight this charge in the first place. “Even if GS were to prevail in court, they have already lost. The reputational damage is already measured in billions of dollars, and will last years if not decades.”

- Furious decline in newspaper ad sales eased in 1Q, but struggling industry still isn’t showing signs of rebounding. “The less-awful sales in the first months of this year gave publishers the gift of a bit more time to fundamentally reposition their businesses,” Newsosaur blogger Alan Mutter says. “But there is nothing in the first-quarter numbers to suggest that the storm for newspapers has blown over.”

- S&P 500 has averaged a 0.12% gain on the Friday before Memorial Day since 1971, with positive returns coming 59% of the time, Bespoke Investment Group reports. But the performance hasn’t been so hot recently, with the index averaging a 0.28% decline throughout the last 10 years, firm notes. And the measure has dropped more than 1% on three instances in last decade.

- Warren Buffett’s testimony next week before FCIC is subpoena-driven, writes Fortune senior editor-at-large Carol Loomis, a pal of the Berkshire Hathaway (BRKA BRKB) chairman.

- FASB publishes proposal that would overhaul how companies value many assets and liabilities they hold. “Tremble US financial institutions, for FASB is about to fair value your assets,” FT’s Alphaville says.

- There are still calls for more (yes, more) government spending. “The long-term deficit needs attention, but right now it’s critical for government to spend,” says former labor secretary Robert Reich. “Otherwise we have no hope of getting free of the gravitational pull of this recession.”

- If enough tech giants go after a market, will it eventually catch on? Just a week after Google unveiled details of Google TV, Engadget reports Apple (AAPL) will take another crack at its three-year-old Apple TV product. But as MarketWatch’s John Dvorak pointed out in a column last week, it may be a hard slog, even for the biggest of behemoths.

- “The Great Recession is over, and the Great Transition is here,” James Picerno writes. In theory, distinguishing between the two is a piece of cake. In practice, reading the tea leaves is going to get complicated at times.”

- The Apple faithful struggle figuring out the best way to carry around the iPad. Aw, poor fanboys, such a conundrum – what are they gonna do??

Investors and financial advisors always need to watch out for companies engaging in fraud and deceit. Howard Schilit, founder and CEO at Financial Shenanigans Detection Group, describes some of the early warnings signs of accounting tricks and gimmicks companies use to manipulate their financial statements.

Check my recent Skype interview with Schilit, who was speaking from the CFA Institute conference in Boston.

Wait a minute. I thought stocks were only supposed to go up...

From the “flash crash” to deepening worries over Europe’s debt crisis, May was one nasty month for investors.

With the stock market closed Monday in observance of Memorial Day, today is the month’s final trading session. And investors can’t flip the calendar quick enough. The Dow was off 6.8% heading into today’s trading and on pace to finish May with its biggest monthly point and percentage drop since February 2009.

It’s also poised to register its biggest May point drop ever and largest May percentage decline since 1962, when it fell 7.8%. The slide snaps a string of three straight monthly gains.

The broader S&P 500 and Nasdaq Composite have actually fared worse. S&P 500 was off 7.1% heading into Friday and Nasdaq was down 7.5%.

A Fitch downgrade of Spain’s debt flames some worries about Europe after yesterday’s respite, putting a final negative coda on May. DJIA earlier off as much as 163, but has bounced off the lows and recently down moderately on light volume ahead of the holiday weekend.

Continue reading…

More economic data out this morning, and more information to challenge notions that the recovery is still gaining strength.

As notedyesterday, the downward revision in 1Q GDP, and noteworthy slowdown in measures of manufacturing from the Kanas City Fed suggest, at best, the recovery remains on shaky ground, and at worst may already be starting to come apart.

GDP was revised lower in part because consumer spending was less robust than originally reported. That appears to have carried over at least into April as data today show personal incomes gained (good) but spending flattened (not good), increasing the savings rate (good long term, but not right now). For a recovery that’s depending on the consumer to pick up the spending baton from Uncle Sam, that’s not an encouraging sign. The savings rate in April — 3.6% vs 3.1% in March — reached its highest level since January.

Continue reading…

No matter what happens today, May was a bad month for stocks (it was a bad month for everything, really, unless maybe for New York Knicks fans, and even that’s a pretty big maybe.) But despite yesterday’s big rally, the underlying themes and issues haven’t changed, which means it may not exactly be a summer of love we’re in store for.) Mike Reid and I discuss in today’s Markets Hub.

Calmer tone pervades on this last trading session of the month, with US stock futures hinting at a flat open.

Even with yesterday’s burly rally, major equity indexes are on track for an awful May. Dow Industrials on the verge of their biggest monthly point and percent drop since February 2009, and worst May performance, percentage-wise, since 1962. S&P 500 staring at its worst May point drop in history, and worst May percentage drop since ’62 as well.

April personal income and spending, ISM-NY May business conditions survey both due at 8:30am; ISM-Chicago May gauge at 9:45am ET; Reuters/Univ of Michigan final May consumer sentiment due at 9:55am. Bond market closes early.

S&P futures 3.90, DJ futures up 31. Ten-year shaded higher, yield at 3.34%.