Stocks drop on danger signs in Europe

The need for leaders to hash out a bailout plan for Spain grows more urgent as the nation's borrowing costs soar. US earnings expectations are generally low as Alcoa prepares to post results after the close.

By TheStreet Staff Jul 9, 2012 9:16AM
Updated at 12:42 p.m. ET

The Associated Press with

Stocks fell in early trading Monday on more signs of instability in Europe and ahead of the start to second-quarter earnings season in the U.S.

The Dow Jones Industrial Average ($INDU) was down 66 points at 12,706. The S&P 500 ($INX) was down 6 points at 1,349. The Nasdaq Composite ($COMPX) was down 15 points at 2,923.


The need for European financial leaders gathering in Brussels to hash out a bailout plan for Spain grew more urgent as borrowing costs for the country hit extraordinarily dangerous levels.

The yield on the Spain's 10-year bonds rose to 7% Monday, a level at which Greece, Ireland and Portugal sought international bailouts.

Greece is still trying to right itself after electing leadership that vowed to stick with repayments to international lenders. The nation's deputy labor minister resigned from the new coalition government Monday, saying it should have pressed harder to renegotiate the terms of the country's bailout agreements. Greece is in its fifth year of recession and has survived as a nation for two years on international rescue loans.

Spain is in better shape financially and can afford the high rates for a few weeks at least. However, a long-term solution is very much needed to prevent the nation, which has an unemployment rate near 25%, from defaulting.

The U.S. economic calendar is light Monday, with May U.S. consumer credit numbers expected at 3 p.m. ET.


Dow component Alcoa (AA) kicks off the second-quarter earnings season after the close. Analysts expect the aluminum producer to report profit of 5 cents a share over the past three months.


Overall, expectations for second-quarter earnings are low. According to Reuters, earnings are expected to show growth of 5.8% over the same time last year. However, the financial sector is benefiting from an easy comparison because of the Bank of America (BAC) mortgage lawsuit settlement, the report pointed out. Excluding Bank of America, second-quarter growth is estimated to come in at 0.7%. Excluding the entire financial sector, second-quarter growth is estimated to be down 0.3%.


In company news, Health benefits company WellPoint (WLP) said Monday it reached a deal to acquire managed health care firm Amerigroup (AGP). WellPoint agreed to pay $92 a share in cash for Amerigroup, or about $4.9 billion. Amerigroup shares closed Friday at $64.34, making the premium of the deal 43%.


Best Buy (BBY) is laying off 2,400 workers as part of its restructuring efforts. The company will cut 600 jobs in its Geek Squad technical support business and 1,800 other workers in its retail stores.


Celgene (CELG) isn't buying Human Genome Sciences (HGSI), according to a source in contact with Celgene management, reported TheStreet's Adam Feuerstein. Late Friday, Reuters, citing an unnamed source, reported that Celgene was one of two possible bidders for Human Genome Sciences, which is trying to fight off a hostile, $13-a-share offer from GlaxoSmithKline (GSK). Celgene has no interest in an acquisition of Human Genome or a merger of equals between the two companies, a source told Feuerstein. Human Genome has set a July 16 deadline for takeover offers from suitors other than Glaxo.


Air Lease (AL) placed an order for 60 Boeing (BA) 737 MAX 8 and 15 737 MAX 9 airplanes. The order is valued at $7.2 billion.

More from TheStreet


Hmmm seems strange that everything is so wrong with the world economy and yet the central banks are still pumping trillions of dollars into the super rich bank accounts instead of generating jobs and putting people back to work.


We are still in a Death Spiral of lost jobs and an ever weaker and weaker economy.

Jul 9, 2012 9:49AM
Our economic problems run far deeper than what can be healed by more reckless bubble-blowing by the Federal Reserve. At the center of global economic turmoil is a mountain of bad debt that was extended on easy terms by weakly regulated lenders with a government safety net. Global leaders have done all they can to protect the lenders at the expense of the public-to make good on the bond contracts of mismanaged financial institutions by breaking the social contracts with their own citizens. The limit of this unprincipled  madness is being reached !
Jul 9, 2012 9:44AM
I think most all who stop by this blog know that reality is not being depicted by the folks inside the lines of this market.  The carrot and donkey thing is no longer relevent. As the old song says "gimme some truth".  Much like the shaking out of a bear market we will need lots of time and sincere effort to recreate  the confidence this "politically" correct nonsense has destroyed.  JMHO
Jul 9, 2012 9:45AM
well, at least the home grown tomatoes are ripe now
Jul 9, 2012 10:55AM
Sometimes I think we've already lost. The very fact that we have to convince people in America that socialism is bad economics, bad for the poor, bad for the individual and bad for a nation's standard of living as a whole, is a tell-tale sign that we've already lost the debate. If people can't see this for themselves, especially with the melt-down taking place in Europe, how will they ever believe our argument? Obama will sweep the battle-ground states, and continue with his policies of socialization.
Jul 9, 2012 10:45AM
Stocks drop on danger signs in Europe


OMG, we had better start looking out for the danager signs in this country.  We don't need to

go to  Europe to find danger signs.  The globe stops here.


There three things that need our immediate attention in this country.


1.  The tax code.  If we don't find a suitable way to levy and collect taxes, and yes there

is a diffrence between levying and colleting taxes, that will raise the revenue we need

to cover this huge debt we have accumulated it will do no good to cut spending.


2.  Cut spending, see 1 above.  Of course we need to cut spend, but we need to do it in

a way that will not decemate certain segments of our society. 


3.  Regulate, but regulate what needs to be regulated.  That probably will require a completely

new start on almost every regulatory agency and regulation we have in place right now. 


I know one thing.  If we don't start regulaing politics, and yes I mean both political parties,

and start to run this country as it needs to be run, we are going to go over the edge before



The people in Europe are just as smart as we are, so let them worry about their situation.

We don't have any smarts to give away.  We need all of it here.




Fed QE merely means : they have loaned so much money to the banks so the banks can buy US T-bills. That the banks are getting nervous ( holding so much US debt when the USA  could default the next time congress does not rise the debt limit ) that they refuse to borrow the money and the Fed has to step up and buy the US T-bills directly instead of indirectly.


Why do you think the government bailed out the banks??


They did not want everyone to know that they screwed up in 2008 and did not realize that $10 trillion of our debt was coming due at the same time and $5 trillion was not rolling over and the government did not have the $5 trillion to pay out.


Hence the grid lock in the banks.


That is why they are twisting the debt to long term to get most of it locked up in thirty year notes but that is going to take a long time. In the meanwhile they still have to figure out how to roll over or pay out on about $8 trillion a year.


Given that no one is their right mind is going to roll over the US T-bills at the end of this year when we fall off the fiscal cliff things are going to be worse than 2008.

Jul 9, 2012 10:32AM
Comsense, you hit the nail on its head.  One week, the EuroZone is doing well.  The next, it is doing poorly. This economic team in the WH is using Europe as its economic model, as Europe goes down the tubes.  Are liberals born dopes, or is it a learned behavior?
Jul 9, 2012 10:24AM
Wait a minute, just a week or so ago all was well in the Euro Zone.  Apparently, the influx of cash from lenders in small quantities is not enough to keep things going for very long.  Comparing a 25% unemployment rate to our 15% real rate means that things in Spain are not good at all, the patient is very sick from all that debt.  This will play out to a louder and louder siren warning as fall approaches.  Many contrarians say before the end of 2012 another unraveling will begin in the US....makes me feel fact I wish the US Federal Reserve would be put on exlax....the tonic would clean out the bowels of incompetence.  Hopefully voters will also see the incompetent economic team at the White House as bad medicine and turn them out.....not much hope here however as there are too many liberals using the government udder. 
Jul 9, 2012 12:26PM
Again, speculatiuon!! This is completely ridiculous!! Last week, best week since October of last year! This week, suddenly gas prices rise, stock market falls. ALL ON SPECULATION!!! This is the main reason we need tighter restrictions on speculators!!! Anybody who doesn't think we need stronger regulation of Wall Street, is nuts!!!
Jul 9, 2012 10:39AM
Ok...  Here are some of the highlights of Obamacare.

If you do not purchase health insurance you will be (tax or penalty) charged $95-$695 per person per year.  However, you can join or cancel an Obamacare policy at any time.

Will not people game the system.  I.e. pay the fine until they are hospitalized?   They can then elect to get coverage when they are admitted.  Obamacare actually makes this process mandatory.  

So a person would always be better off not buying insurance until they are admitted.  And cancelling it as soon as they are discharged.    People will game any system we think up for maximum benefit for the least cost.    Let the games begin!
Jul 9, 2012 9:51AM
What? You don't think the recent drama has all been crafted to get Ben to do some more printing? QE Addicts rule this economy, which exists on one block in a big city in a fully compressed nation that used to be free.
Jul 9, 2012 11:33AM
Bob in La: So, obama is not responsible for the economy? Very funny. He sure had no problems blaming and continuing to blame the previous president for all our economic woes...
Jul 9, 2012 11:32AM
What hope is there for a country, when at least half of the people have accepted ignorance as the normal?
Jul 9, 2012 11:26AM

>>>recent poll showed only 14 congressmen and Senators read the whole thing. <<<


And it's a sad state of affairs that none of our elected officials read ANY of the bills before they vote on them, but rather vote in lock-step with their parties.  Perhaps that should be a issue during the campaigns... "and Mr. Candidate, how many bills did you actually read before voting on them?" 

Jul 9, 2012 9:59AM

Do you see one party favoring "QE" policies over the other?

Personally, I think they both equally support what is ultimately destroying us.

What say you???

Jul 9, 2012 10:53AM
Gary Myers...   I view the idea of slashing spending like that of a ship that has struck an Iceberg.   We can close the water tight doors, and hope it stay afloat, even though that means some will suffer, or we can just abandon ship.   We already have struck the debt berg, Obama drove us right into it.  I say close the water tight doors and let certain leech elements of society deal with it.

Liberals tend to use the tax code to punish behavior they dislike, I am suggesting we use it to punish the poor.  Maybe then they will start working to try to not be poor.   Liberals want to reward sloth and failure, and punish success.  

We MUST slash spending 1.2 Trillion to balance the budget before ANY new TAXES can even be considered.   And then this new tax money must be used exclusively for debt repayment.  

One more time,...  NO NEW TAXES until the CUTS are made and the Budget is BALANCED.

Jul 9, 2012 11:03AM
Can't wait for the tens of thousands of new IRS agents needed to enforce Obamacare.  That's Obumo's idea of a jobs bill. 
Jul 9, 2012 11:35AM
The issue is not Europe, the issue is poor growth in the US becuase of a failed administration.  Obama is bad for business.
Jul 9, 2012 10:41AM
 I said a week ago that if the Spanish bank thingie wasn't perceived as good enough, their 10 year bond would rise back above 7%. I now see 9% right around the corner

 Meanwhile the clock keeps ticking until Greece misses their July loan payment without another bailout installment that has to be approved by Merkel
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