It feels like déjà vu, with fear of European debt playing havoc with Wall Street. Stocks pitched down Wednesday in the U.S. as borrowing rates climbed for Spain and Italy, a sign that investors are losing confidence in those countries' finances.
As European bond yields rose, U.S. stocks fell, but once again finished well off session lows. Why?
U.S. economist Stephen Guilfoyle with Meridian Equity Partners says the markets are desperately trying to find a bottom. “The fact that every day they try to beat equity markets down, and every day those markets rally to higher levels before the close should probably tell you something. Markets are trying to find a bottom.”
Guilfoyle adds that what’s keeping the market from breaking badly is the hope among investors of further monetary stimulus from the Federal Reserve.
At the closing bell Wednesday, the Dow gave up 97 points; it had been down as much as 183. Nonetheless, the loss marked the sixth consecutive day of declines for the blue-chip average. Over that time, the Dow has lost a whopping 444 points.
This morning, futures are pointing down once again. So are oil prices.
Crude oil is hovering near $96 a barrel, marking a loss of nearly $10 from just last week. Reasons for the decline include fears that the global economy may grow less than expected this year, reducing worldwide demand for crude; and there’s a huge supply of oil on the market. Data out yesterday show that oil inventories rose to a 22-year high last week.
If market forces continue to dictate a decline in the price of crude oil, that will likely mean continued good news for drivers ahead of Memorial Day. Over the past week alone, gas prices are down by a nickel a gallon, with AAA putting the national average at $3.75.
It’s T-minus eight days in the countdown to the Facebook IPO expected May 18. Facebook yesterday tweaked its regulatory filing with the SEC to reflect that the number of people logging onto its social site is continuing to grow faster than the number of ads delivered. This is in part because more people are using the site on their mobile devices, where ads are less prominent.
The obvious risk is that the company’s advertising business will slow down further. Expect potential investors to be all over this one as Facebook moves its IPO roadshow across the U.S. this week and next.
That IPO is expected to be a multi-billion dollar payday for Facebook’s CEO Mark Zuckerberg, as well as Uncle Sam and the state of California. Because Facebook issued its employees what’s called restricted stock units (RSUs), they are taxed as ordinary income. That means Facebook’s workers will owe federal and state taxes averaging $1.1 million per employee.