Business

May sours: Spain euro pain mangles markets

The pain of Spain remained largely on Wall Street yesterday, which was left with its worst May for stocks since 1940.

After Spain was stripped of its gold-plated AAA rating due to Europe’s shaky euro currency, stocks around the world tumbled in a knee-jerk reaction to the investor fears of losses that have gripped markets for weeks.

“It definitely spooked the market, no doubt about it,” said Terry Morris, senior equity manager for National Penn Investors Trust Co. in Reading, Pa. “Up until now, it’s been mostly Greece and the threat of Spain and Portugal and Ireland. With Fitch actually downgrading Spain, it seems as if it is no longer a hypothetical, the contagion is now real.”

The euro, already down nearly 8 percent against the greenback in May, slipped to $1.22 for the sixth straight month of declining value.

The Dow Jones industrial average dropped 122.36, or 1.19 percent, to 10,136.63, led by Bank of America and Disney, which both fell 2.8 2.7 percent. The Standard & Poor’s 500 Index lost 1.24 percent, or 13.65, to 1,089.41, while Nasdaq slipped 0.91 percent to 2,257.04, off 20.64.

Many investors fled stocks for the safety of US Treasury securities, sending the benchmark 10-year Treasury note rising in price and pushing its yield lower to 3.29 percent from 3.36 percent on Thursday.

For the month, the Dow lost 7.9 percent, the S&P fell 8.2 percent and the Nasdaq was 8.3 percent lower.

Fitch said it downgraded Spain’s debt because it sees the country’s austerity measures possibly crimping economic growth. However, the rating agency said the country’s outlook remains stable despite the move one notch to AA-plus. Most investors were keeping their fingers crossed until markets reopen on Tuesday following the three-day Memorial Day holiday in the US.

Next week will bring a series of new economic reports that could give a clearer picture of the job market as well as housing and consumer spending.

“This month was damaging to the psychology of investors, so consumption may taper in the near term,” said Jamie Cox, managing director at Harris Financial Group. With Post wires