MarketView for June 11

Summary

It was another dismal day on Wall Street on Monday, although things started out well with the Dow Jones Industrial Average well into triple digit gains. However, then the wheels came off the wagon as trading proceeded to disintegrate . The key reason is that the Street’s traders once again became embroiled in worries over the “What if” game being played out in Europe.

The announcement over the weekend of Europe's aid package for Spanish banks did little to alleviate investor concerns regarding both the euro zone's finances and a possible slowdown in the wider global economy. Spanish bond yields rose as a bailout of up to $125 billion for the country's struggling banks failed to quell concerns that Madrid may be locked out of funding markets and forced to seek external help.

The New York-traded stock of Spanish lender Banco Santander fell 3.1 percent to $5.92. Weakness in Europe's financial sector was mirrored in the United States where the financials were the weakest performing sector within the S&P 500 index. Shares of Morgan Stanley, which has recently been a barometer of concerns about Europe due to perceptions of the investment bank's exposure to the region, saw its share price fall by 2.5 percent end the day at $13.37.

Spain's 10-year bond yields ended higher at 6.5 percent as an early rally in prices quickly evaporated. Some investors were concerned the new debt would put existing bondholders lower in the capital structure, which increases the risk for those holders.

The fear is that a crisis in Spain would compound the currency bloc's troubles as June 17 elections loom in Greece, which many think could lead to Greece's exit from the euro zone. The worries come at a time when economies the world over are showing signs of slowing. China's inflation, industrial output and retail sales all flagged in May. It was the second straight month of sluggish growth.

Trading volume was light with about 6 billion shares changing hands on the three major equity exchanges or about 14 percent below the 10-day moving average of shares traded.

Companies are finding it more difficult to increase revenue now than at just about any time since the financial crisis. Firms that make up the S&P 500 are expected to increase sales by just 2.2 percent in the current quarter, according to Thomson Reuter’s data.

AK Steel fell 14 percent to $4.99 after two brokerages cut their ratings on the small cap, including a "sell" rating from Goldman Sachs, which cited a highly leveraged balance sheet and weak steel prices. Domestic steelmakers are struggling with weak demand, rising costs and narrowing margins. Production capacity has yet to fully recover from the most recent recession. US Steel fell 6.5 percent to close at $17.89.

Apple announced its own mobile mapping service and made its enhanced Siri voice-search available for iPads as it rolled out souped-up software and hardware on Monday to help it wage war on Google. Nonetheless, Apple's shares still ended the day down 1.6 percent, closing at $571.17 after the announcement at the company's developers conference on Monday.

Goldman Sachs is close to striking a deal over the sale of its hedge fund administration business with State Street, the Financial Times reported. The move would create the largest administration services provider to hedge funds worldwide. Goldman's stock ended the day down 1.8 percent to close at $92.80. State Street added 1.5 percent to close at $42.79.