There are mixed headlines out of Europe today, with growing
indications of some sort of a rescue for Spain's banks in the works
and economic data out of Germany indicating that the Euro-zone's
economic turmoil is starting to weigh on demand for the country's
exports. The news flow on the home front is on the light side
today, though the shrinking April trade deficit number was a tad
wider than expected.
Today's trading action will likely reflect continuation of the
momentum from the late-Thursday session when stocks gave back all
of the earlier gains. There has been little fundamental support for
the positive move in the markets this week, and this realization
appears to be finally sinking in. The issues that caused the stock
market rally to peter out in early April - Greece and Spain's
banks, and the U.S. growth outlook - remain largely
unaddressed.
While the prospect of a potential German slowdown is no doubt
bad news for the Euro-zone, it is no surprise for many who expected
the region's problems to eventually seep into the core. But the
movement on the Spanish banks front appears promising as it could
potentially ring-fence the country's financial sector ahead of the
Greek elections later this month.
The plan appears to be that Spain will get some sort of a
"bailout-lite," where the country's banks will directly get capital
injections from the Euro-zone bailout fund without subjecting the
country to onerous stipulations that accompanied the earlier
bailouts of Greece, Ireland and Portugal. A lot of details
apparently still need to be worked out, as the IMF and an outside
consulting firm are evaluating the full extent of the Spanish
banking sector's loan-loss provisioning needs. But of all the ideas
floating around, this seems the most promising to tackle the
issue.
In corporate news, the founder of
Best Buy
(
BBY
), Richard Schulze, is resigning from the company's board and
reportedly exploring options for his roughly 20% stake in the
company. It is unclear whether Mr. Schulze plans to sell his stake
outright or use it as launching pad to take the beleaguered
retailer private. Strong competition from
Amazon
(
AMZN
) and other online retailers has raised questions about the
long-term sustainability of the big-box electronics retailer.
In other news,
McGraw-Hill
(
MHP
) is reportedly the sole remaining bidder for oil and gas data
researcher Wood McKenzie, which has had a for-sale sign for some
time now. The move would make sense for McGraw-Hill as the purchase
would give its energy data-centric Platts division greater scale
and industry coverage.
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