U.S. Stocks, ETFs Fold On Friday

U.S. stocks closed Friday at the day’s lows on fears over Spain and the ongoing European debt crisis, along with disappointing earnings from General Electric.

ETF Wrap Up:

Dow Jones Industrial Average (NYSEARCA:DIA) -0.9%

S&P 500 (NYSEARCA:SPY) -1.0%

Nasdaq 100 (NYSEARCA:QQQ) -1.4%

Russell 2000 (NYSEARCA:IWM) -1.3%

Renewed concern about the European sovereign debt crisis was sparked by events in Spain, where civil unrest escalated as a result of outrage that taxpayers will be on the hook for a significant portion of the debts incurred by the nation’s banks (NYSEARCA:EWP). Beyond that, many of Spain’s municipalities face their own budget crises which remain to be addressed. European finance ministers agreed (by conference call) on Friday to approve the €100 billion bailout of Spanish banks. Nevertheless, the Bank of Spain reported on Thursday that Spanish banks hold a total of €155.84 billion in “doubtful” loans – greatly exceeding the €100 billion bailout. Spain’s ten-year bond yield spiked to a Eurozone record high of 7.26 percent on Friday from Thursday’s closing level of 6.98 percent.
Agriculture ETFs soar as drought conditions persist in Midwest

The Midwest continues its record heat wave which is sending shock waves through the agricultural commodity world.

Supplies are threatened and crop failure is being discussed as summer wears on. June was the fourth hottest month ever, according to the National Oceanic and Atmospheric Association.

Most analysts forecast higher prices ahead as the drought is forecast to continue into late July.

Soybeans have reached record highs and corn is also near a record high on commodity futures exchanges.

The trip wire for Spain’s decline was one of its regions, Valencia, asking the central government for help, which of course is problematic since Spain itself might need a rescue. Today European finance ministers signed off on a 100 billion Euro bailout for Spanish banks.

Bank shares were sharply lower today with the SPDR Financial ETF (NYSEARCA:XLF) dropping 1.5%.

Microsoft fell on a quarterly loss while Google added 3% on strong advertising revenue. Declining stocks outnumbered advancing stocks by about 2:1 in lighter than average volume.

In spite of a rough day on Friday, the S&P 500 (NYSEARCA:SPY) gained 0.4% for the week, the Dow Jones Industrial Average (NYSEARCA:DIA) was also up 0.4% for the week and the Nasdaq (NYSEARCA:QQQ) added 0.6%.

Bottom line: U.S. stocks and ETFs struggled with fear over Europe Friday but were supported by mostly favorable earnings reports this week. Weakness in financials and transportation make for a nervous overall environment. Expect more volatility ahead.