U.S. equities finally stopped the bleeding yesterday with a significant rally as the Dow, Nasdaq, and S&P 500 gained 2.9 percent, 3.7 percent, 3.3 percent respectively.  Despite the rally, May has proven to be a difficult month for equity managers as the Dow, Nasdaq, and S&P 500 have lost 6.8 percent, 7.4 percent, and 7.0 percent respectively. As I have stated, the market had been calling for a correction for some time.  Clearly a more subtle and gradual correction would have been preferred as an alternative to the precipitous and fear igniting free-fall witnessed over the past month.

 U.S. stock futures are pointing to a positive open this morning.  A late rally yesterday helped keep the DOW from closing down triple digits following a statement by Congressional leaders that it is unlikely banks will be forced to spin off trading desks under the new financial reform bill.  Equities still closed in the red following worries the debt crisis will slow the European economy which could curb their appetite for U.S. exports and hinder our recovery.  The sovereign debt crisis coupled with the downgrade of several major European countries such as Greece, Spain and Portugal has caused the S&P to drop over 9% this month. 

 Here we go again. Or at least that’s what this market feels like relative to the credit crisis circa 2007-2009.  Global equity markets continued to violently sell-off yesterday on concerns that the global economy is slowing down,  and as investors got spooked after an unexpected uptick in U.S. jobless claims.  When coupled with European fears and the probable passage of financial regulatory reform in short order, it is no surprise that this market, which was ripe for a correction, pulled back. 

 U.S. equities sank lower again on Friday on concerns that the European bailout package would curb global economic growth given the significant austerity measures that are required in the region. More telling is the steady rise in 1, 3, 6 and 12 month Libor rates suggesting that European banks are reluctant to lend to one another for lack of trust. Specifically, European banks own a significant amount of European sovereign debt, creating significant counterparty fears. Recall that Libor was the key metric that foretold the U.S. credit crisis, so it is very important to keep any eye on what it does.

U.S. stock futures are pointing to a lower open this morning on continued fears that the European sovereign debt crisis may hurt the global economic recovery.  The sell off is causing U.S. treasuries to climb for a second day as the flight to quality trade picks up.  This crisis in Greece and surrounding countries has helped to push the Euro to an 18 month low.  Currently one Euro is equal to 1.2481 dollars.  This is down over 17% from the 2009 high of 1.5134.