US stocks under renewed selling pressure again as the latest worries across the pond center around Spain’s move to rescue a troubled lender.
The most recent concerns surrounding Europe come after the Bank of Spain rescued regional savings bank CajaSur over the weekend, suggesting sovereign debt woes could travel further. The move prompts Miller Tabak equity strategist Peter Boockvar to wonder what’s next for stocks.
“It will be the near term reaction to European budget cuts,” he says. “And whether bond investors are encouraged enough by them to buy sovereign new issues over the next few months to allow these countries to continue to finance themselves (and thus avoid tapping the bailout money).”
Concerns surrounding Greece and the broader European economy have weighed heavily on US stocks throughout the last few weeks as the market has entered into its first official correction in 15 months.
But the difference between a typical correction and something that spirals into something much worse is “faith that the bullish story hasn’t changed all that much,” writes LA Times’ Tom Petruno.
All that should matter near-term is whether new economic data and corporate profits continue to support the recovery thesis. This morning, the National Association of Realtors reported existing-home sales climbed 7.6%, to a 5.77 million annual rate in April, well above economists’ expectations as buyers took advantage of the first-time home-buyer tax credit. Prices and inventories also rose.
But stocks aren’t reacting positively to the good news and trade lower as European jitters continue to overshadow positive news on the domestic front.
“If recovery hopes fade amid (or because of) May’s barrage of depressing news, the bulls know they don’t have much else on which to build a case for stocks at these prices,” Petruno says
Dow down 47, but was off as much as 111 in earlier trading.