Master Plan
Market Commentary
By Charles Payne, CEO & Principal Analyst

I wrote about this in the morning report, but we needed to look deeper because this is the main news driving the market at the moment. Is Europe getting its act together-or not?

There always seems to be a master plan waiting to be deployed, yet it's obvious that none has ever worked long enough to deserve that moniker. Still, over the weekend a German newspaper, Die-Welt said there is such a plan in the works. I say it's been part of an overall plan all along, but the implementation hasn't gone the way architects once thought. The Euro was going to level the playing field in Europe and mitigate the economic engine of Germany. Maybe it would have worked if members had discipline and made commitments made by Germany - of course if that were the case then there would never be a need for the Euro in the first place.

Be that as it may, that was the plan—it backfired.

Now if the Euro is to survive, a lot of nations will have to cede more sovereign rights. I see it happening. This will be a closer banking union to go with political (EU) and military (NATO) organizations; after that I suspect health care, etc. With central planning for these important components of nations, we move closer to a United States of Europe.

* Military
* Political
* Banking

One question includes how many participants will there be? Not all EU members are going to go for this deal aside from the core nations:

* Belgium
* France
* Italy
* Luxembourg
* Netherlands
* Germany

All are going to say yes and the majority of the 17 Euro nations will be in as well. Mario Monti hinted he's okay with it and so too did Mariano Rajoy of Spain. The logistics can't be hammered out overnight, but the Street needs to think this is at the top of the agenda at the upcoming EU summit later this month.

A Rough Ride
By Carlos Guillen

Equity markets continued to decline during today's trading session as it is apparent that all eyes remain on Europe, causing investors to become even more worried. Clearly, the sentiment at the moment is that a worldwide slowdown is unraveling. And here at home, economic data continues failing to provided any type of solace for investors.

After last week's slew of less than favorable U.S. economic data, this week is starting out on the same depressing path as there is nothing pointing to encouraging growth. In fact, according to the Commerce Department, bookings dropped 0.6 percent after a revised 2.1 percent decrease in March, representing the first sequential decline in more than three years. The result also landed below the Street's estimate calling for a gain of 0.2 percent. With the turmoil going on in Europe at the moment and with the slowing growth in Asia there appears to be no catalysts for equities in the near future. One last bit of hope was coming from a favorable trend in employment, but that bubble has popped with last Friday's jobs numbers. Now that employment is slowing, we can surely expect to see a deceleration in consumer spending, and given that the U.S. economy is made up of approximately 70 percent consumption, economic growth is almost doomed to grow at a well under normal growth rates.

The situation in Europe, of course, remains at the center of attention. It has become a sort of soap opera that everyone watches on a daily basis and cannot wait for the next episode. Most recently George Soros came out making a prediction that governments in Europe have about three months until the euro blows up. Germany continues to take a firm stance on not backing a euro bond, but the question is how long it will be able to withstand the pressure coming from the rest of the euro nations.

At the moment stocks continue sliding, breaking through all sorts of support. Everything is getting hit; even companies that have performed well so far. At the moment firm specific risk is out the window, only systemic risk appears to be of any importance. The Dow is currently down over 60 points, or half a percent, and the next support is at about 11,750. Hang on guys and gals, we are in for a rough ride.

Factory Orders
By David Urani

Factory orders were a big disappointment, falling by 0.6% in April from the previous month, well below expectations of a 0.1% gain. Excluding transportation, the results were even worse, down 1.1%. This now means that factory orders were down three out of the four months from January through April; and that doesn't even count May which we now know was a tough month amid a world slowdown.

Going through the categories, we weren't too surprised, with usual suspects like metals, machinery and computers weakening for the month. Computers have been a real disappointment, with orders down 2.2%, 5.6% and 5.9%, respectively in the three months ended April. However, we can take some solace from the fact that falling oil prices were the main source of weakness.

Add a Comment!