MarketView for May 8

Summary

The major equity indexes came under pressure on Tuesday after political developments in Greece fanned concerns about Europe's fiscal health. However, a late in the day rally helped indexes cut losses enabling them to close well above their lows for the day.

Nonetheless, indexes and consequently many stocks spent most of the session sharply lower, with selling following declines in European markets. Fears that Greece will reject an existing international bailout and potentially leave the euro prompted the selling across markets.

The S&P 500 fell through support at 1,350 to reach levels not seen since early March, but buyers subsequently emerged to support stocks.

Sectors sensitive to the economy floundered, as investors moved toward safety plays such as utilities. The day's decline in stocks was part of a broad run to safety. Yields on German debt hit a record low while oil fell for a fifth straight day.

Leftist leader Alexis Tsipras began efforts to form a Greek government by renouncing the terms of an international bailout and threatening to nationalize banks. Meanwhile, the weekend's elections in France and Greece herald a new era of opposition to government austerity and add to concern about the strength of economic demand in the United States and China.

The threat of a Franco-German split over policies to tackle the region's debt crisis loomed after anti-austerity Socialist Francois Hollande was elected French president.

With 434 of S&P 500 companies reporting results as of Tuesday morning, 66.8 percent exceeded estimates, according to Thomson Reuter’s data. At the start of the earnings season, more than 80 percent had exceeded expectations.

Fossil was down 38 percent to close at $78.52. The fashion accessories maker slashed its full-year outlook on weakness in Europe. McDonald's fell 2.1 percent to $93.55 after April same-store sales missed expectations. Electronic Arts fell 4.3 percent to $14.48 a day after the company’s revenue guidance came in below Street consensus estimates.

Approximately 7.72 billion shares changed hands on the three major equity exchanges , a number that was above the daily average of around 6.76 billion shares.

Consumer Borrowing Up in March

Consumers borrowed more often in March, mostly through credit cards, and took out more loans to attend school, driving overall borrowing up by the most in more than a decade. As a result, total consumer borrowing rose by $21.4 billion in March, according to the Federal Reserve. That's the seventh straight monthly increase and the largest since November 2001.

One measure of auto and student loans increased by $16.2 billion, while a separate gauge of credit card debt increased by $5.2 billion after declining in January and February.

The increase pushed total borrowing up to a seasonally adjusted $2.54 trillion. That's slightly below the all-time high of $2.58 trillion reached in July 2008, eight months after the Great Recession began.

After hitting that peak, consumers cut back on borrowing sharply for more than two straight years. They began taking on more debt again in the fall of 2010 and have stepped up borrowing in recent months. The steady rise in borrowing is generally considered a good sign for the economy. It suggests consumers are more confident and comfortable taking on more debt.

One reason given for the increase is that stronger hiring since last fall has encouraged more Americans to borrow more, logical statement. In addition,

there was a large surge in student loans, which could reflect an effort to take out loans in advance of a scheduled jump in rates this July.

With weaker income growth, U.S. households haves spent more while saving less. The savings rate was 3.8 percent of after-tax income in March, nearly a full percentage point below the 4.7 percent where it had been three months before. For all of 2011, the savings rate declined to 4.7 percent of after-tax income, compared to 5.3 percent in 2010.

Households began borrowing less and saving more when the recession began and unemployment surged. While the expectation is that consumers are ready to resume borrowing, they are not expected to load up on debt the way they did during the housing boom of the last decade.

The Federal Reserve's borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.