Anti-austerity momentum in Greece continued to weigh down markets with the prospect of the country defaulting or leaving the euro. Spain's Ibex 35 Index lost 3 percent, led by bank stocks, while its 10-year yields rose more than 6 percent over banking-sector concerns, which were helped along by news that the government will take over Bankia S.A. (Madrid: BKIA), the product of a 2010 merger of seven troubled Spanish banks.
All Asian markets were down, led by a 1.5 percent drop in Japan's Nikkei, the lowest closing in nearly three months. The yen has been appreciating, which is hurting exports and the corporate earnings linked heavily to them. On the upside: Toyota Motor Co. (NYSE: TM) ADR shares rose 3 percent in New York after the carmaker reported stellar growth in profits and an upbeat 2013 forecast.
Meanwhile, oil continued its downward slide in the U.S. and London after the U.S. Energy Information Administration reported that crude supplies are at the highest in 22 years. The U.S. Commerce Department also said stockpiling is slowing, suggesting similar deceleration in U.S. factory demand. Good news, bad news: Summer fuel-pump prices will decline, but only because industrial activity is declining, too.
Markets were mostly down worldwide while German and U.S. debt was in demand. European shares have all but wiped year-to-date gains. Cost Plus Inc. (NASDAQ:CPWM) shares rocketed over 20 percent after Bed Bath & Beyond Inc. (NASDAQ:BBBY) announced it was buying the Oakland, Calif.-based specialty home goods retailer for $495 million after a successful joint test run selling specialty foods inside some Bed Bath & Beyond outlets. A big loser was Cincinnati-based retail chain Macy's, Inc. (NYSE:M), which saw its stock decline more than 3 percent despite beating analysts' forecasts thanks to a disappointing annual forecast that suggests the momentum might be wiped out if consumers spend less for the rest of the year.
Safe-haven investors sent the German 10-year Bund to an all-time high, conversely sending its yield as low as 1.49 percent before rebounding but still closing down for the day The U.S. 10-year Treasury yield fell below the key resistance level of 1.8 percent before rising to close above it at 1.83. Despite record low yields, the U.S. auctioned $24 billion in notes. Japanese 10-year yields touched a 19-month low before rebounding.
The euro continued its fall against the yen and the dollar as investors mitigated their risk. Concerns the Reserve Bank of Australia will soon lower its interest-rate target put pressure on the Aussie against the yen, boosting slightly the dollar against the yen. Meanwhile, India's rupee closed at an all-time low as demand for the dollar remained high while India's capital outflow continues to be a problem.
Natural gas futures closed at a two-month high for a second day after the U.S. Energy Department said electricity demand would increase by 21 percent this year. Natural gas was at a 10-year low in April. Gasoline for June delivery also rose slightly. Gold fell to its lowest level since December.