Are the U.S. Bulls Sneaking Up on Europe’s Bears?

Major U.S. stock indexes and ETFs rebounded today after four days of losses.

Major U.S. indexes rose today, with the benchmark S&P 500 (NYSEARCA:SPY) gaining 0.6% to close right at its 200 day moving average.

The Dow Jones Industrial Average (NYSEARCA:DIA) added 0.2% while the Nasdaq 100 (NYSEARCA:QQQ) rose 0.4% and the Russell 2000 (NYSEARCA:IWM) was the leader for the day with a gain of 1.2%.

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In other major markets, gold (NYSEARCA:GLD) declined 0.1% and oil (NYSEARCA:USO) added 0.3%.

The ISM services sector came in better than expected and investors seemed able to shake off poor economic reports in Europe and the ongoing debt crisis in Spain.

Advancing outpaced declining stocks by a 2 to 1 margin as the rally was broad based and almost all sectors participated.

In Europe, financial ministers had a conference call and decided to monitor the situation and everyone will be watching for the ECB action scheduled after its meeting on Wednesday.

Today’s action brought the Russell 2000 (NYSEARCA:IWM) back above its 200 day moving average while only 52% of all NYSE stocks remain above their 200 day moving average, down from more than 85% at the beginning of May.

Reports regarding European manufacturing output showed the most rapid decline since 2009 as the Euro region’s economy continues to decline and head deeper towards recession. Markit Economics reported that purchasing manager’s report dropped to 46 from 46.7 last month which is bad news for the region as readings under 50 indicate contraction.  Today’s reading was the lowest in three years.

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Spain reports that its’ locked out of credit markets even as it tries to sell bonds on Thursday.

Spain’s  Treasury Minister Cristobal Montoro said that Spain’s borrowing costs are too high and that the country needs a European bailout and help to shore up its ailing banks.  His announcement comes after weeks of Spain insisting that it could handle its credit problems by itself.

Spanish 10 year bonds soared to a Euro high spread over the German Bund last Friday and hovers at 6.3%, near the “unsustainable” level of 7%.

Germany, the most powerful country in Europe, appears headed for a drastic slowdown at the Markit PMI report for the region declined to 46.0 in May from April’s reading of 46.7.  Readings below 50 indicate contraction while readings higher than 50 signal expansion.  Today’s report was the fourth monthly decline in a row.

John Nyaradi is the author of The ETF Investing Premium Newsletter.