The S&P 500 is now down over 9% from its recent high. This pullback was long overdue as news over the past few months had indicated the deterioration in Europe was picking up steam. Economic data in the U.S. has also been weakening. As I pointed out in early April, the pattern of the last two years of the stock market rising in the first quarter on stronger economic data and seasonality only to peak and reverse course in April was a very likely scenario again this year and indeed has taken place.
Stocks are certainly more attractive now than they were a month ago, however we still do not know if the market will be able to avoid a contagion if/when Greece leaves the Euro. If Greece were to leave the Euro, the market’s attention would likely increase its focus on Spain and Italy.
With the 10-year US Treasury rate down to 1.70%, it is obvious the market is bracing for more volatility.
On a different note, Facebook shares began trading this past Friday. With shares closing the day just pennies above their $38 IPO price, there was disappointment among investors and market pundits who had expected a strong rally in the shares after the incredible hype of Facebook’s IPO. For more on Facebook’s IPO, read on…