Dow slumps 143 as Spanish bank deal euphoria fizzles

The major averages lose all of Friday's gains -- and more. Investors fear that the $125 billion bailout of Spanish banks is just too little. Italy is a worry, too. Apple shares slump despite new product announcements. Oil falls below $83.

By Charley Blaine Jun 11, 2012 11:36AM
Charley BlaineUpdated: 8:05 p.m. ET

U.S. stocks opened nicely higher today as investors initially appeared to be happy with Spain's decision to seek a $125 billion bailout for its banks.

But that was about as good as things got for the stock market. The rally collapsed, and the major averages finished the day by giving up all of Friday's gains and then some. The Dow Jones industrials ($INDU), which had jumped 96 points at the open, closed down down 143 points to 12,411.

The problem was the realization that the deal may solve little because Spain's economy is so weak. And Spanish Prime Minister Mariano Rajoy may have described the terms of the deal a bit too optimistically.  Lastly, it wasn't clear where the $125 billion (or 100 billion euros) would come from. In addition, Greece holds a critical election Sunday that could decide if the country stays in or leaves the eurozone. Leaving the eurozone would cause major disruptions for financial markets.

The net result of all of today's worries was that Spanish bond yields were higher; the 10-year Spanish bond ended the day yielding 6.508%, up from 6.22% on Friday and after opening at 6.166%. Italy's 10-year bond yield was at 6.032% because its own debt problems may get new scrutiny. Governments are thought to have trouble financing debt at yields above 6%.  

In addition to the Dow's big loss, its worst since June 1, the Standard & Poor's 500 Index ($INX) tumbled 17 points to 1,309, and the Nasdaq Composite Index ($COMPX) fell 49 points to 2,810. The Nasdaq-100 Index ($NDX) was down 42 points to 2,517.

Article continues below.
Apple (AAPL) had been a big support for the Nasdaq-100 early in the day, but the market's pullback turned a gain of as much as $8.18 into a loss of $9.15 to $571.17. The loss subtracted 7.7 points from the Nasdaq-100.

At its annual developers conference in San Francisco today, Apple announced the next version of its operating system for iPhones and iPads as well as fresh updates for MacBooks. But the features apparently didn't impress investors. Missing, according to Seeking Alpha, were MacBook Airs with retinal displays, an $800 MacBook Air, new iMacs and no Apple TV.

Futures trading suggests a flat open for stocks on Tuesday. Much of the big trading for the rest of the week will be to get ready for Sunday's election in Greece.

A big disappointment for market bulls
The market's swoon was a huge disappointment to traders and investors alike. Late Sunday, the Dow appeared headed toward opening some 145 points higher, with oil prices shooting higher on the prospect of something resembling new growth in Europe.

Didn't happen.

Complicating matters was China. When the People's Bank of China cut rates on Thursday, the expectation was for bad economic news ahead. The weekend data dump from China wasn't pretty, but it wasn't all bad either. May exports grew 15.3% on year and imports 12.7%, well above expectations, while CPI increased less than was forecast. However, industrial production and retail sales disappointed.

Instead, the slump hit materials and financial stocks the hardest.

Steel shares were battered after AK Steel (AKS) was downgraded to "sell" by Goldman Sachs. Shares closed at $4.99, a 52-week low. Goldman cited the company's heavy debt burden and low steel prices. U.S. Steel (X) was off $1.24 to $17.89, and Nucor (NUE) dropped $1.09 to $36.13.

JPMorgan Chase (JPM) was off 86 cents to $32.82. CEO Jamie Dimon is supposed to testify to a Senate committee on its $2 billion trading loss.

Bank of America (BAC) dropped 28 cents to $7.28. Citigroup (C) was off $1.29 to $26.48, in part because the company said late Friday it didn't plan to return capital to shareholders this year. Investment bank Morgan Stanley (MS) fell 34 cents to $13.37. Goldman Sachs (GS) fell $1.74 to $92.80.

Crude oil falls; gold rises on uncertainty
Crude oil (-CL) in New York settled down $1.40 to $82.70 a barrel and traded to as low as $81.11 in electronic trading. Brent crude, the benchmark European oil, settled down $1.47 to $98 a barrel and was trading at $96.40 in late-day trading.

The price of regular unleaded gasoline fell to $3.54 a gallon today, according to AAA's Daily Fuel Gauge Report. That's a 10% decline from the peak price of $3.963 in early April.

Among oil-and-gas-related stocks, only marketer Valero (VLO) and British energy giant BP (BP) showed gains today.

Coal stocks were hit hard because of reports of falling prices in Asia thanks to exports from the United States and Indonesia. Alpha Natural Resources (ANR) was off 86 cents to $8.46. Peabody Energy (BTU) was down $1.15 to $23.12.

Gold (-GC)  settled up $5.40 to $1,596.80 an ounce. Silver (-SI) and copper (-HG) were higher as well.

The 10-year U.S. Treasury yield was down to 1.6% from 1.637% on Friday.

Energy prices -- New York close



Mon.

Fri.

Month chg.

YTD chg.
Crude oil (-CL)

$82.70

$84.10

-4.43%

-16.32%
(per barrel)











Heating oil (-HO)

$2.6357

$2.6721

-2.50%

-9.56%
(per gallon)











Natural gas (-NG)

$2.2180

$2.2990

-8.42%

-25.79%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.6566

$2.6852

-2.43%

-0.03%
(per gallon)











Brent crude 

$98.00

$99.47

-3.80%

-8.06%
(per barrel)











Retail gasoline

$3.5400

$3.5420

-2.21%

8.06%
(per gallon; AAA)












Only eight of the 30 Dow stocks were higher, led by Verizon Communications (VZ), aerospace giant Boeing (BA) and AT&T (T). Decliners were ahead of gainers 3.8-to-1 and 3.4-to-1 on the New York Stock Exchange and on Nasdaq, respectively.

Caterpillar (CAT), IBM (IBM), McDonald's (MCD), Chevron (CVX) and United Technologies (UTX) -- stocks of companies that do large amounts of business in Europe -- contributed nearly 78 points to the Dow's loss.

Meanwhile, only 33 S&P 500 stocks were higher, led by Valero and Frontier Communications. Alpha Natural Resources, U.S. Steel and homebuilder PulteGroup (PHM) were the laggards.

Only five Nasdaq-100 stocks were higher, led by chipmaker Nvidia (NVDA), which was up 14 cents to $12.26 on an upgrade from UBS Securities. Ctrip.com International (CTRP) and Garmin (GRMN) were the laggards.

Garmin, the maker of global positioning systems, was off $3.575 to $38.20, its low on the year, after Apple unveiled a map app that could be a serious competitive problem both for Garman and for rivaL Harman International Industries (HAR). Harman closed at $38, also its low on the year.

Short hits from the markets -- New York close



Mon.

Fri.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0800%

0.080%

14.29%

700.00%
5-year Treasury note 

0.691%

0.712%

2.98%

-16.75%
10-year Treasury note

1.600%

1.637%

1.20%

-14.48%
30-year Treasury bond

2.723%

2.765%

1.91%

-5.75%
Currencies











U.S. Dollar Index

82.32

82.562

-0.97%

2.23%
British pound

1.5550

1.5528

0.89%

0.08%
(in U.S. $)

 








U.S. $ in pounds

£0.643

£0.644

-0.88%

-0.08%
Euro in dollars

$1.25

$1.27

1.49%

-3.17%
(in U.S. $)

 








U.S. $ in euros

€ 0.797

€ 0.790

-1.47%

3.28%
U.S. $ in yen 

79.62

79.48

1.35%

3.26%
U.S. $ in Chinese

6.37

6.37

-0.20%

0.67%
yuan











Canada dollar

$0.976

$0.979

0.73%

-0.56%
(in U.S. $)

 








U.S. dollar 

$1.026

$1.022

-0.73%

0.56%
(in Canadian $)

 








Commodities

 

 

 

 
Gold (-GC)

$1,596.80

$1,591.40

2.08%

1.91%
(per troy ounce)

 








Copper (-HG)

$3.343

$3.285

-0.67%

-2.71%
(per pound)

 








Silver (-SI)

$28.6160

$28.4710

3.09%

2.51%
(per troy ounce)

 








Wheat (-ZW)

$6.3050

$6.3025

-2.06%

-3.41%
(per bushel)

 








Corn (-ZC)

$5.9200

$5.980

6.62%

-8.43%
(per bushel)

 








Cotton 

$0.6875

0.6872

-4.31%

-25.01%
(per pound)

 








Coffee

$1.5670

1.574

-3.84%

-31.77%
(per pound)

 








Crude oil (-CL)

$82.70

$84.10

-4.43%

-16.32%
(per barrel)










 

255Comments
Jun 11, 2012 12:04PM
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What happened to Greece? I guess that problem is solved, now we are onto Spain, then Italy, then France... wash, rinse, repeat. Kicking the can down the road never solved anything. Until we (the US included) return to sound economic principles, the world economy will never rebound.  I guess they are just waiting for Superman.

Jun 11, 2012 11:58AM
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The loan to Spain's banks wasn't too small, it was wrong. As said over the weekend, the money doesn't address any core problem: no job recovery and income revival. These two aspects lift up housing values and generate badly needed municipal revenues. Each time Central Banks print more fiat cash, they deflate the cash already out there, that isn't circulating because it is absorbed into the "complex financial instruments" causing most of our issues in the first place. It's time to work as in labor now. Button pressing and paper pushing have had their days and it will cost all of us for decades. Notably, stocks taking losses today were the same ones leading the Dow during last's week's binge at the Kool Aid stand.
Jun 11, 2012 2:49PM
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Governor Christie had it right earlier today... He pointed-out that now Obama is blaming them (governorns, mayors, etc.) for laying-off state employees. The fear and blame campaign just keeps on rolling for Obama -- doesn't it?  
Jun 11, 2012 11:57AM
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Dang good thinking. Why would stocks go up when you make a bad loan?
Jun 11, 2012 2:38PM
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O'Bama is a disgrace to our nation...what is left of it.  He is losing it right now with his beliefs and his teleprompters are not helping him with 'scripts'.  He cannot think in knowing what is going on.  He is no leader and never will be.  He is arrogant beyond belief.  He is black/white or whatever.  He makes me ill.  The 'markets' have painted themselves into a corner as knew they would and have zero reliabilty.  No volumn still and will never be as they are 'churning' you 401k's and pension plans .... and, this will continue. 
Jun 11, 2012 4:06PM
avatar
The Germans have a "strong" foundation to their economy. They are a very resourceful and capable people. However, even the strong Huns cannot carry the weight of: 11 millions Greeks, 45 million Spaniards, 55 million Italians, and eventually, 60 million Franc moochers.
Jun 11, 2012 12:38PM
avatar

Drastic debt can't be solved by MORE debt!  Spain, and Italy, and Japan, the USA, and MORE all need to do just the opposite and begin to cut massive government entitlements and get a budget surplus to begin to pay-down these huge national debts.

 

The only sensible response to governments ladleing-on more debt is for our stock markets to fall.  The Obama regime simply can't control this natural reaction! 

Jun 11, 2012 3:05PM
avatar

5PM - Building infrastructure (roads/bridges) comes from tolls and taxes on gasoline. The government does not have any money... They must either take money from the private sector (taxation), print it (inflation that hurts the private sector) or borrow it, that hurts the private sector and the next generation down stream. Yes, there is a legitimate role for the government, all we are saying it that enough is enough. We are $16 Trillion in debt because of all the nice roads, bridges, etc. the government has built. They are not good stewards of the money, so lets figure out ways to get them out of our lives. BTW we do need government, no one is arguing that we do not. They have a role, especially for national defense  and overall safety. However, a government that governs less -- governs best -- even Jefferson understood that one.

Jun 11, 2012 4:27PM
avatar
I still think it's probable that Greece will get out of the Euro, and Spain and Italy will follow. The US economy will take another hit. Gold and Silver will continue to climb through 2012 but it will be a very bumpy ride. QE3 will do nothing for the middle class anywhere in the world and so the depression/recession will continue. As far as the US economy is concerned, I don't think President Obama nor Romney could fix it unless we invest in the US with programs to get the middle class working again and bringing home decent pay checks.
Jun 11, 2012 2:04PM
avatar
The sustained rally will come in November. Buy before the rally. And to those other posters you are correct about the leftists. Let us remember that Nancy Pelosi, former Mistress Speaker of the House, believes that unemployment benefits aid in the employment figures by providing the unemployed with money to purchase goods to employ others. Is it any wonder we are in such a mess?
Jun 11, 2012 2:00PM
avatar
"OBAMA IS NOT REAGAN"

Or much of anything else for that matter.................... 
Jun 11, 2012 3:10PM
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V_L - I am with you -- We should get rid of the biggest "chief" of them all. You said it exactly right. The Pres is the chief and he needs to go.
Jun 11, 2012 3:36PM
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If you want solutions, accountablity and prosperity -- vote Republican. if you want more problems, blame and more (food stamps, welfare) vote for the guy we already have -- he wants more of those needy voters to lord over too. Having them become independent of the government in any way, shape or form is the last thing on his mind.
Jun 11, 2012 2:39PM
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Doda and 5PM really don't get it...They have no concept on how strong, safe, and prosperous communities work. The bottom line is this: If you create a productive and prosperous private sector, the government will follow. The government cannot lead in this exchange. They must follow. Private, productive citizens engaging in free-market commerce create the very revenue to fund the government. When gov employees make more than those they are supposed to be serving, how is that sustainable?
Jun 11, 2012 1:46PM
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"Leftists apparently believe that if you employ a teacher/policeman/ad​ministrator, etc., they will go out and spend the money on: food, housing, appliances, etc, from the private sector. However, the reason that model is flawed is that the government can't give a teacher/policeman etc. a penny without first taking it from someone else." 

Correct! Every one of those jobs is about an $80k net loss to the tax base, which is already in the red. A person has to be seriously delusional to believe that this is an answer!
Jun 11, 2012 1:32PM
avatar
"The Private Sector's doing Just Fine."
"We aren't creating enough Government Jobs."

Translation: 
"I don't care about Private Sector Jobs. I want to grow government, and further deplete the tax base. This way you'll all depend on me for everything. Get it? Because my Ignorance is overshadowed only by my Arrogance." 
Jun 11, 2012 1:07PM
avatar
"Any gambler should know that Romney can play his cards but that he will lose to Obama who has the house advantage.  Shut up and deal, please."

Ya, right. Never mind that he might as well have put the gun barrel in his mouth and pulled the trigger himself with his insightful comments over the weekend.

"The Private Sector's doing Just Fine." 

He was better off reading from the teleprompter.....
Jun 11, 2012 3:03PM
avatar
5pm Friday...

How about we simply raise PROPERTY TAXES if the people in those communities want more Teacher's, Police or Firemen.  It is certainly NOT THE FEDERAL GOVERNMENTS job to provide any of those.

Since almost none of their pay comes from the federal government, it seems like a pretty stupid argument to me.   If you want more of these services (I don't, especially overpaid teachers) RAISE LOCAL REAL ESTATE taxes to pay for them.  I don't see democrats doing that.  They are as usual trying to get someone else to pay for them...  

We can let the voters in those communities VOTE on it...
Jun 11, 2012 1:58PM
avatar
"Reagan also deregulated a lot of industries and lowered taxes that favored the private sector. If you improve the private sector, you will receive tax money from that exchange to hire more government... Get it? "

The theory is solid, except we don't need to hire more government, we need to lower debt and deficit.
Jun 11, 2012 12:04PM
avatar

More Smoke and Mirrors from Fraud Street to SCREW THE SMALL INVESTOR !

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