So long, May -- you won't be missed! Rarely has "sell in May and go away" seemed so prescient. The Dow Jones Industrial Average
In today's action, at 1:45 p.m. EDT the Dow sits down 0.09% while the Nasdaq
Why the week turned
A Molotov cocktail of global concerns and a poor U.S. economic data has dampened optimism that had surfaced on Tuesday. On that day, positive housing news and hopes of a China stimulus started the week out with a nice gain. However, at the time I warned that hopes of a large Chinese stimulus went against quotes from China's official news agency.
As the week wore on and it grew clearer that China would be holding off on another large stimulus, the same companies that saw Tuesday's pops faded. Caterpillar
China knows that a knee-jerk reaction like a massive stimulus would only worsen its long-term predicament of too much spending on investment projects. That stimulus in turn would also pile more debt on regional governments.
However, while China's slowing growth is one sideshow to this month's falling markets, the main event has been Europe. A Spanish debt downgrade led to losses yesterday. Today, there are reports that the IMF is discussing how to handle a bailout of Spain's Bankia if the country is unable to save the bank.
It's an ever-changing situation, and periods of despair and hope flow seamlessly from hour to hour. For example, the market's rebound after a sharply negative first hour today was attributed to new public opinion polls that showed a pro-bailout party was leading opinion polls in Greece ahead of its June 17 elections.
Yet, it's also worth noting that the lead is by a slim 1.7 percentage points. From a sample of 1,128, that's within the margin of error. Also, that lead can be tenuous with parties jockeying for different coalitions within the new government. In short, whether or not Greece elects a pro-bailout government is far from settled. The unfortunate reality is that means continuing rockiness in the weeks ahead.
To the bomb shelters!
So we end a May that was trying, to say the least, but lots of the same instability remains in the month ahead. If volatility is a ride you're not best suited to handle, a good bet is to stick with high-quality Dow blue chips like McDonald's
Take the long-term view
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Eric Bleeker owns shares of no companies listed above. The Motley Fool owns shares of Coca-Cola. Motley Fool newsletter services have recommended buying shares of McDonald's and Coca-Cola. The Motley Fool has a disclosure policy.
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