Daily Insight: Existing Home Sales and More European sPain

U.S. stocks bounced around the cut line for most of Monday’s session in a show of either remarkable or unbelievable resilience -- considering the developments out of Spain over the weekend could be seen as a harbinger of European banking problems soon to come and mounting tensions in Korea. But the major indices did succumb to weakness late in the day, erasing almost all of Friday’s gain in the final 90 minutes of trading.

Financials, energy and basic material shares led the market lower. Health-care and tech were the best performing groups, but even these were down as all 10 major industry groups declined on Monday. Tech actually spent most of the session in positive territory, up as much as 0.85% even as the broad market struggled to peek above the cut line, but sold off by 1.38% in the afternoon.

Four Spanish savings banks are set to merge in a coordinated effort by the Bank of Spain in an attempt to strengthen their solvency. The four banks hold more than $168 billion in assets, which is kind of a big deal for a $1.6 trillion economy. These banks went on a lending binge during the Southern European real-estate boom and as Spanish unemployment has leapt to 20% from 8% in less than two years the banking troubles are clearly widespread.

On the Korean peninsula, the South has begun to respond, although tepidly, to the March 26 sinking of their warship. The North has reportedly ordered their military to ready for combat. One can hardly take anything news that comes out of the North at face value, but conditions are ripe for trouble.

We’ve mentioned a couple of times now that risk lurks around many corners, just waiting to jump out and scare the complacency out of everyone. A couple of these risks have begun to do so.
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Brent Vondera, Senior Analyst
www.acrinv.com