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2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Stocks have worst May in decades

UPDATED at 4:12 p.m.:

Stocks staggered out of their worst May in decades, with all three major indices closing down on the day and well down for the month, driven down by the European debt crisis and anxiety in Asia.

The Dow closed down 1.2 percent at 10,136.63 today. The Dow was down 8 percent for May, which CNBC is reporting is the worst May for the Dow since 1940.

The broader S&P 500 closed down 1.2 percent at 1,089.41 today. Down 8.2 percent for the month, it was the worst May for the S&P 500 since 1962.

The tech-heavy Nasdaq closed down nine-tenths of 1 percent 2,257.04 today. The Nasdaq was down 8.3 percent for the month.

The U.S. economy is trying to recover but it is being buffeted by troubles in two hemispheres. In Europe, a spreading debt contagion has enveloped Greece, Spain, Portugal, Italy and Ireland, and threatens to move to France and the U.K. Europe buys 25 percent of U.S. exports, so troubles in Europe drove down stocks here.

In Asia, an internal political revolt in Thailand was quashed just in time for the threat of war on the Korean peninsula to heat up. Korea is a big trading partner of the U.S., and a free-trade agreement knocking down trade barriers between the two nations is on the table in Washington.

The old Wall Street axiom goes "Sell in May and then go away" for the summer. Instead, investors were happy to see May itself go away and hope for a better summer.

Fitch downgrades Spain, stocks plummet

1:24 p.m.: The quiet day on Wall Street is over.

Stocks are down following ratings-agency Fitch's downgrade of Spain's credit rating, following a similar downgrade last month from rival ratings agency S&P.

The Dow, the broader S&P 500 and the tech-heavy Nasdaq are all down at or near 1 percent.

Spain is a bigger problem for Europe than is Greece, because Spain is so much larger: Too big to fail and too big to save at the same time. Nevertheless, the European debt contagion has spread to the Iberian peninsula, with Portugal consumed, as well.

Fitch said Spain's rating is "stable," but it cut the nation's rating from "AAA" to "AA+."

"The downgrade reflects Fitch's assessment that the process of adjustment to a lower level of private sector and external indebtedness will materially reduce the rate of growth of the Spanish economy over the medium-term," said Brian Coulton, the head of EMEA sovereign ratings, in a statement. "Despite government debt and associated interest costs remaining within the AAA range, Fitch anticipates that the economic adjustment process will be more difficult and prolonged than for other economies with AAA rated sovereign governments, which is why the agency has downgraded Spain's rating to AA+."

Translation: Like Greece, Spain is going to have to implement austerity measures to get rid of debt in the public and private sectors and that's going to slow down the economy. Further, Fitch thinks Spain is in such bad shape, it can't handle these measures as well as other first-tier countries, hence the downgrade.

In an interview with CNBC moments ago, Coulton said that he does not expect to issue another downgrade to Spain anytime this year. He said that in the past, Spain has shown that it is tough on debt and expects it to attack the debt problem in a credible fashion. The Spanish government debt-to-GDP ratio is actually smaller than it is here in the U.S. That said, "the economy could turn out worse" in Spain, Coulton said, "and we don't think it's an AAA country."

Miller Tabak equity strategist Peter Boockvar writes: "S&P removed Spain's AAA rating back on Jan 19th, 2009, when they were downgraded to AA+. This was followed up on April 28th, 2010, when S&P moved again and lowered Spain's rating to AA. Thus, Fitch is playing some catch up while Moody's still has Spain at Aaa."

The news has also driven down the value of the euro against the dollar.

Quiet opening on Wall Street

10:11 a.m.: It's a quiet and cautious day so far on Wall Street as stocks are down slightly, but not dramatically, as traders take it easy one day before the long holiday weekend.

In the first 45 minutes of trading, the Dow is down two-tenths of 1 percent.

The broader S&P 500 is down one-tenth of 1 percent.

The tech-heavy Nasdaq is just underwater.

Traders expect stocks to go sideways today and largely hold onto gains from yesterday's big rally.

Europe is trading almost exactly the opposite with a little more than 90 minutes to go in its trading day. Germany, England and France all are up slightly. The euro is up ever so slightly against the dollar.

In other news this morning, April personal income was up slightly and spending was flat.

By Frank Ahrens  |  May 28, 2010; 4:12 PM ET
Categories:  Wall Street  
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Next: April construction spending surges, fueled by now-ended tax credits

Comments

WHY DOES ANYONE LISTEN TO THESE SELF-SERVING RATING AGENCIES! These are the people who told us derivatives were AAA rated investments, causing trillions in dollars of investments in a glorified casino game which caused the financial crisis! Now these rating agencies are going to pass judgment on whole countries credit worthiness. This is just a ploy to ensure Wall Street's recovery at the expense of allowing governments to help out their real economy on Main Street. DO NOT TRUST ANY OF THE MAJOR RATING AGENCIES, THEY ARE TOOLS OF WALL STREET SPECULATORS!!!

Posted by: bravestar360 | May 28, 2010 2:11 PM | Report abuse

I'm afraid I'm going to have to downgrade Fitch's rating to AAQ7-niner.

Posted by: zippyspeed | May 28, 2010 2:16 PM | Report abuse

Did I hear a "niner" in there? Were you calling from a walkie talkie?

Posted by: CBT2 | May 28, 2010 2:36 PM | Report abuse

Well when you let entitlements get out of control, and invest heavily in misguided schemes like solar panels (and then find there really is no market for it), that's what you get.

USA here we come.

Posted by: moebius22 | May 28, 2010 2:44 PM | Report abuse

There must be a mistake. A few months ago the administration told us the since Spain had spent big on a green economy it had created lots of jobs and unimaginable wealth.

I guess that was change they couldn't afford.

Posted by: Ombudsman1 | May 28, 2010 3:23 PM | Report abuse

If "austerity" is such a good thing, then why isn't there more acclaim for its most successful practitioner, Nicolae Ceausescu?

Posted by: mattintx | May 28, 2010 3:26 PM | Report abuse

The real problem with ratings agencies is they take waaaaaay tooooooo long to make these moves.

Spain has been surviving on debt since the housing bubble collapsed in 2007. It's three years!!!!!

Germany and France made tough adjustments. Sarkozy and Merkel negotiated furloughs with employers and unions; local governments accepted cuts in infrastructure projects.

But in Spain... they just borrowed like crazy in order to keep the government running at full speed, as if the crisis never happened. But the crisis did hit Spain, hard. Unemployment has soared above 20 percent, forcing the government to borrow huge amounts of money, just to pay unemployment benefits. And the "cajas" (Savings and Loans) are going down, forcing the government to borrow even more money.

According to some analysts, Spain needs loans for some 400 billion euros (HALF A TRILLION DOLLARS) to avoid economic collapse. That's the reason the EU was forced to build that monster ONE TRILLION DOLLAR FUND a few weeks ago.

This didn't happen overnight. It was clear two and a half years ago.

What's really SHOCKING is the fact that rating agencies have kept Spain in the AAA category for so long. If they downgraded Spain to B in 2008, Spain would have made the adjustments before the crisis became a full catastrophe. And investors would have been cautious about putting money in Spain.

Now, it's waaaaay toooooo late.

Posted by: tropicalfolk | May 28, 2010 3:42 PM | Report abuse

Completely comprehensible given the numbers:

- Spain, public debt: 65,9% of the GDP in 2010.

- The US: 98.1% of the GDP estimated for 2010.

Well, yes, Spain will have problems to pay the debt, deserves a lower qualification and to be compared with Greece that has a "small" debt of at least 113% of GDP (not very clear how much it really is thanks to some "help" from a well known Wall Street firm).

Posted by: jramasco | May 28, 2010 3:45 PM | Report abuse

Sadly the investment community has a lemming type mentality running with the herd be it sensible or not. China makes a statement and it rises, a downgrade in credit it declines. Did 9/11 affect the profitability of corporations for the massive decline or did fear drive the drop? 2000 years after Jesus drove the moneychangers from the temple the financial community has become 40% of our GDP putting a tax on everything done. We have progressed technically not socially is the root of many of our problems. We have the ability to provide great health care, clean energy, the goods and services Americans consume in America, we don't have the economic system that allows it.

Posted by: jameschirico | May 28, 2010 3:51 PM | Report abuse

This downgrade means nothing, the facts are that European economies are doing much better than US economy, as you can see from Euro being so much more valuable that US Dollar.

So:
Euro was MUCH MORE valuable than US Dollar last year
Euro is MUCH MORE valuable than US Dollar now. In fact as of this moment European money (Euro) is a MIGHTY 25% MORE VALUABLE than the pathetic USA money (Dollar).
Euro will be MUCH MORE valuable than US Dollar next year.
You can bank on it.
WHY?
In summary because Europeans are not suffering from a party of Lunatics as US is with the Republican party and Europe is not suffering from a right-wing (Lying) war-mongering media as US is with such lying machines as Fixed news, Talkradio, Wall Street Journal, CNBC, etc. etc., as a result of which:

1- European Governments invest much more of their People's money (Taxes) in their people and cities via such things as Universal nationalized health care, Universal education to Ubiquitous (electric powered) public transportation etc.

2- European Governments do not waste their people's money on Unnecessary Wars (Iraq War, Vietnam War, etc.) or on a Gargantuan Military.

There is a gr8 related story here:
http://RealNewsPost.com?n=Europal.39732

Posted by: ThinkDeep | May 28, 2010 4:15 PM | Report abuse

There must be a mistake. A few months ago the administration told us the since Spain had spent big on a green economy it had created lots of jobs and unimaginable wealth.

I guess that was change they couldn't afford.

Posted by: Ombudsman1

===============

Yes, there is a mistake and it's you. Germany is the country in Europe that leads in green energy/solar panels. To the point that US companies in solar set up factories there.

You'll be happy to know that Germany with a population of 82 million exports more in $ than the US does with 300+ million people.

Posted by: James10 | May 28, 2010 4:29 PM | Report abuse

I HOPE IT CRASHES WITH A VENGENGOUS THEN NON OF THE CROOKS MONEY IS WORTH SQUAT. THEN THE THE LIKES OF THEM WILL BE IN THE SAME SINKING SHIP AS US. HA HA HA HA HA HA HA

Posted by: JWTX | May 28, 2010 4:49 PM | Report abuse

The LaRaza MECHa Aztlan overtake of 10 USA States by Mexico Foreign Invaders running in to claim it has created NO CONFIDENCE.

Close the Borders with troops and show the World we are solvent.

Posted by: dottydo | May 28, 2010 4:51 PM | Report abuse

This panic is echos from the many scary waves of it in 2008, set up by years of improper and lax regulation of the financial industry by the Bush administration. GOP'ers do not believe in regulation, the Bush team set out to prove that, and it blew up in their face. Greed is greed, and proper oversight is proper oversight.

Balkingpoints / www

Posted by: RField7 | May 28, 2010 5:18 PM | Report abuse

Blame Obama, Pelosi and Reid!!!!!!!

Posted by: Jimbo77 | May 28, 2010 5:22 PM | Report abuse

Screw Wall Street and the stock markets. Refined gambling for those with diplomas.

Who can play in a casino where someone farting in jakarta can cause a 500 point swing one way or the other.

Rubbish all of it.

Posted by: jfern03 | May 28, 2010 5:51 PM | Report abuse

On grass? Or on Astroturf?

Posted by: pressF1 | May 28, 2010 6:03 PM | Report abuse

Thanks Barack - Obama and the Dems have made investing in the Stock Market a dangerous game....you never know when they are going to attack an industry or a company. They are socialist and they hate anyone or anything that makes lots of money......unless they contribute heavily to the Democratic Party (Google, etc).

Posted by: Realist20 | May 28, 2010 6:41 PM | Report abuse

Proof of this "hate," realist?

Posted by: mattintx | May 28, 2010 6:57 PM | Report abuse

Dear Consumers ...

You may lose your jobs due to no fault of your own.

You pay about 30% interest on bank cards and receive a savings interest of 2 or 3 % if you're lucky, while your banks borrow from the Fed and each other at 5.5%.

Social Security, and probably your employers' retirement funds too are on very shaky ground.

The economy, especially the stock market, is still unstable.

You need desperately to pay down your debts and save as much as you reasonably can for the next economic or job market downturn.

PLEASE - get some more credit cards and deficit spend for the next year to help pull our economy out of the mud. Do your civic duty.

Signed,

Your Federal Government Representatives

Posted by: JHG_sec405 | May 28, 2010 7:15 PM | Report abuse

After 14 months of uninteruptable growth in the stock market, I'm a bit relieved to see one bad month. When you consider the debt issues hurting the Euro countries, and the gulf oil spill along with the coal mine disaster and the icelandic volcano grounding air travel and freight ... ALL in the same month? We should be counting our ble$$ings that the markets have not dropped further. Just a blip on the radar.

TGIF

Posted by: free-donny | May 28, 2010 7:19 PM | Report abuse

Nice spin attempt, though, teabaggers! I, for one, and glad the adults are in charge. In troubled times, the kids are safer playing in the sandbox i.e. Fox News Network. I hear Glen Beck is serving milk and cookies!

Posted by: free-donny | May 28, 2010 7:22 PM | Report abuse

If you truly want to know what is going on; Then you will have to accept these things as the TRUTH. Once you understand the following things; All things will be understood. So I tell you Obama is the Anti-Christ, Satan on Earth, Lawless One, or what ever else you want to call this Demonic Figure. His words describe him, He is a False Hope, If you listen to him you will love him. He carries a Bow without an Arrow. He will conquer all through his speech, his false hoods will capture all who sit and listen to him.

Posted by: makom | May 28, 2010 7:35 PM | Report abuse

our problems are just beginning...
with obama spending us into the poorhouse...
obama's future will soon be here...

Posted by: DwightCollins | May 28, 2010 7:35 PM | Report abuse

Um....sounds like some folks had extra kool-aide at the Fox News Picnic!

LoL

TGIF folks...

Posted by: free-donny | May 28, 2010 7:47 PM | Report abuse

Well, I'm unemployed, my ex-wife who lives a few blocks away is unemployed, my son is unemployed, most of his friends and most of my nephews and neices are unemployed, and most of us don't qualify to be counted as among the official unemployment rate. Now, most of my neighbors are unemployed too, but most of them are illegal immigrants, ands trangely, they say they are not having trouble paying their bills. If you are an illegal immigrant, please post here and tell us how you can not work, not collect unemployment but still meet you bills.

Posted by: dambam64 | May 28, 2010 7:59 PM | Report abuse

And to think that I was almost sold on the idea that the economy was getting better!
Hope and change that the people were sold on???
I don't think so!!!

Posted by: SeniorVet | May 28, 2010 8:02 PM | Report abuse

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Posted by: fysa78fdas89 | May 28, 2010 9:25 PM | Report abuse

Businesses have no pricing power. This does not bode well, with high unemployment showing that businesses still need to keep prices under control.

Falling prices as a result of shrinking demand may create an adverse effect by running a larger budget deficit since the government will receive less in taxes.
Falling prices in conjunction with weak demand will further pressure the businesses’ debt burden with respect to income, requiring more services or goods to be provided to repay the loan even with low interest rates.

In this recession, the expectations for future demand were harshly depressed and businesses have been cutting expenses that are reflected not only in the drop for inventories but also by reduced demand for labor.

The US economy is still suffering. What's next?

See article at thewallstreetchallenger.com

Posted by: GigelM | May 31, 2010 8:35 PM | Report abuse

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