After a tough Monday resulting from reactions from a poor jobs report, and a Tuesday with an even larger sell-off, the Dow Jones Industrial Average (INDEX: ^DJI) is down 2.6% so far this week, while the iPath S&P 500 VIX Short-Term Futures ETN (NYSE: VXX) is up more than 14% since Monday. What's happening that could affect markets today?
An eye on Spanish and Italian bonds
Yesterday, yields on Spanish 10-year bonds were climbing toward 6% and increasing the borrowing cost for the Spanish government, which is already burdened with unemployment near 23% and protests against its budget cuts. Italian 10-year bond yields increased more than 4.2% yesterday and now stand at 5.68%. Any potential issue with these countries vastly outweighs Greece, as its 2010 GDP ranked 38th in the world, compared with Spain at No. 13 and Italy at No. 10. More bad news from the eurozone, especially from these much larger economies, could continue to spook investors worldwide; we've already seen the FTSE 100 (INDEX: ^FTSE) fall almost 5% over the past month.
Earnings time
After an upbeat Alcoa (NYSE: AA) earnings report last night, JPMorgan Chase (NYSE: JPM) will be next up to report Friday morning. Alcoa, which analysts expected to lose $0.04 per share, instead posted $0.09 in earnings per share, with more than 10% revenue growth in its industrial products, automotive, packaging, and commercial transport divisions over last quarter.
Analysts expect JPMorgan to post earnings per share of $1.16, which would be a 10% decline from earnings a year ago but a definite improvement over the last quarter's $0.90 earnings per share. Working to improve its balance sheet, JPMorgan recently announced that it will make new student loans only to the bank's own customers, as bad student-loan debt for the bank has increased 72% since 2009, according to Bloomberg.
Further in the week
Tomorrow will see the weekly report on initial and continuing jobless claims, along with the monthly report on the Producer Price Index (PPI), which is one way to judge inflation. The market expects little change from last week's 357,000 initial jobless claims, while the core PPI, which excludes food and energy, is expected to increase only 0.2%.
Think for the long term
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