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Stock Market Closing Report - May 10, 2012

 May 10, 2012 04:09 PM

(By Michael Vodicka) After six straight days of losses, it was time for the bulls to strike back, with the averages closing off their highs but still in the green. For the day, the Dow Jones added .15%, the S&P 500 gained .25% while the NASDAQ trailed with .04% decline.

The bullish turn comes on more news out of the Euro zone after Spain announced it was in the process of nationalizing its fourth largest bank and taking further measures to support its ailing financial sector.  Although the move did achieve its desired result of giving the Street a little injection of confidence and pushing Spanish bond yields back below 6%, on a larger scale, this story is really just beginning to unfold.

That's because it is being reported the Spanish government has initiated discussions with the European Union to tap into its rescue fund. We already know Spain is under massive amounts of financial pressure, but this is definitely a progression of the entire Euro zone story. Those bailout funds simply can't support larger economies like Spain, Italy or Portugal. Greece is generally one of the smaller Euro-member economies, and look how it has rocked the global economic and financial scene for a good two years.

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So if it turns out that Spain or any other larger Euro economies need sizable financial support from the ECB or IMF slush funds, it will have dire effects on the solvency and cohesion of the Union.

Gold and Oil

But the bullish tone in stocks didn't carry over to other markets, with both gold and oil closing mostly unchanged after getting pummeled pretty badly for the last few sessions.

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That weakness in commodities could have something to do with today's mixed economic data. Although initial jobless claims did come in a little better than expected and at a 4-week low, Cisco (CSCO) disappointed the Street with weak guidance and the Bloomberg consumer confidence survey showed further deterioration, moving back to a level that signals a recession and giving back half its gain for the year.

And the smartest money on the Street, AKA, the bond markets, also looked fairly unimpressed with today's green finish for stocks, closing in the middle of the daily range and directly below the recent multi-year high. So the smart money is definitely taking a more cautious approach tight now.

What's Next?

Looking forward, we've got some interesting economic data on tap for tomorrow.

  • 830-Producer Price Index
  • 955-Consumer Sentiment

Both of these numbers will be important. The PPI number will play into the Fed, where lower levels of inflation give the central bank room for further stimulation. So that will be closely watched for clues on how the Fed will proceed as equity's show sustained weakness.

The consumer report will be important too, with a recent bout of weakness showing up in some of the numbers after holding strong for most of the year; if that continues it will put additional pressure on the market going into the weekend.

The Chart

As it stands, the S&P 500 continues to find support between 1,350 and 1,355, with a low print from Wednesday morning just above 1,340. The market was able to break a 6-day losing streak today, but with very little conviction considering the string of steep losses. Tomorrow will be telling as the Street decides what to do going into the weekend, leaving open positions open to large fundamental development while the market is closes. The bears still have control of the market, and with mounting pressure in Europe and other macro concerns, it's going to be an uphill battle for stocks to fight back.

S&P 500 Chart - Key Support Indicator Chart - May 10, 2012(click to enlarge)



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