The U.S. equity markets partied hard on Friday and paid for it on Monday. At mid-day, the Dow was back below 14,000 and the S&P was back below 1,500 as economic headwinds brewed up some dark clouds.
At 1:15 p.m.: DJIA: -0.80%, S&P 500: -0.93%, NASDAQ: -1.15%.
1) Considering the strong start to the year for equities, Ben Bernanke’s smile must be getting as big as the U.S. Federal Reserve’s balance sheet. The Fed Chairman is on record defending the wealth effect, which involves forcing investors into equities by punishing them through record low interest rates and quantitative easing. After an early lackluster reception from the latest QE announcements, Mr. Market is feeling quite optimistic these days… (Read more.)
2) This week, Spanish Prime Minister Mariano Rajoy, who instituted the harshest austerity measures in the country’s democratic history in order to curb the deficit and ensure international support for its collapsing financial industry, was accused of accepting and distributing illegal payments to party members.
The market response to the allegations was immediate and obvious. The yield on the 10-year Spanish bond shot up 22 basis points to 5.43 percent as uncertainty brewed. Spain’s IBEX 35 fell as much as 3.1 percent and the European markets all headed to close dramatically lower… (Read more.)