Shocked...Shocked
Market Commentary
By Charles Payne, CEO & Principal Analyst

Iran has been lying about its uranium program.
Spain needs bailout for biggest bank and richest region.
Greece polls suggest no resolution in next election.

The market is struggling to post a positive week, but it's not panicking and that's the news. I love the way it's been able to close this week, exhibiting a kind of resolve we hadn't witnessed since the start of the year. It's time to open your eyes and be ready. Next week we will have a ton of economic news with very low expectations. I suspect the news will be better than anticipated but not so good it derails hopes the Fed will come to the rescue. My dream of great fundamentals grabbing the rally baton from cheap money isn't here yet. But you have to hang in there and don't blink if there is a relief rally.

Stocks Find Support
By Carlos Guillen

Equity markets have been trading mostly in the red so far during this morning's trading session with little in terms of macroeconomic data except for sentiment results. Of course, all eyes continue to be on Europe, and the adrenaline continues to build around Greece. Although most market indicators are slightly in the red, there is some comfort in that they appear to be at a bottom. We also find some solace in the fact that consumer confidence continues to climb as the jobs and pricing backdrop is looking favorable for consumption to continue in the short run.

Giving investors something to be encouraged about today was consumer sentiment data that beat expectations and reached the highest level since October 2007. The University of Michigan Consumer Sentiment May final result landed at 79.3, which was higher than the Street's expectation of 77.5, increasing from the 76.4 reached last month and continuing a rather encouraging trend that has been developing for the prior nine months.

While there was concern that the recent data from the Labor Department, which showed less than expected job creation, would cause sentiment to waver, it did not. Moreover, fears of gasoline price gains have dwindled. In fact, the statewide average gasoline price is down to $3.50, more than 30 cents cheaper than the peak prices reached in early April and down 44 cents from an almost one-year high of $3.94.

Consumers continue sensing that the employment backdrop is improving and that wage prospects will get better. In fact, according to the survey of consumers, many more consumers reported hearing about recent job gains than job losses. Moreover, it is also worth mentioning that in each of the past three months, a majority of consumers reported an improved economy. Perhaps consumers are overly optimistic about what they are sensing, but this is their perception of reality at the moment.

It was encouraging to see that twice as many consumers expected further improvement rather than renewed declines in the year ahead. This helped the index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, to increase to 74.3 from the 72.3 posted in April.

It should be noted that consumers expect job improvements to be modest, and it does not appear that they have factored in the consequences of a Greek-euro break up. Nonetheless, a better jobs outlook and lower gasoline prices should come together to provide a bit more encouraging backdrop for consumer spending to continue in the short run.

sPAIN
By David Urani

While Greece plays chicken with the euro zone, don't forget about Spain (or Italy for that matter) which seemingly continues to deteriorate. Today it's all about more debt and bailouts that can only further diminish what little faith the investment community has in its sovereign fiscal stability.

You may recall a couple of weeks ago that Bankia was nationalized by the Spanish government, with a €4.5 billion investment into its preferred shares. Well, the saga wasn't over for Bankia as it's requesting more money now. There was an expectation that Bankia and others would be needing more cash, as Finance Minister Luis de Guindos had already said he expected €15 billion more to be needed for the banks. But Bankia now says it needs €19 billion. That would bring the total investment into Spanish banks so far to €33 billion.

But Bankia isn't the only one feeling the heat. The entire region of Catalonia now needs funds from the central government as it has run out of refinancing options; this comes straight from Catalan President Mas.

The markets have actually been pretty tolerant of Spain today, with the IBEX 35 finishing slightly in the green, and with Spanish banks like Santander (STD) and Banco Bilbao (BBVA) just modestly down. Spanish bond yields are reflecting some pain, however, with the 10-year close to the year-to-date highs at 6.31% (high is 6.35%).

I think the trading action could be worse but EU leaders have been having talks and that could mean some new coordinated action; perhaps Spain's ills could bring in another LTRO program. On that note, it was a little funny that the market tapered off in the wake of the best Michigan sentiment index more than four years; it could be a sign that the market sees QE slipping away. In both Spain's and our case we may be in that bailout-mania middle ground when bad news becomes good (government stimulus) and good news becomes bad (no stimulus).

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