It is difficult to feel optimistic about the Greek drama after seeing the pictures of civil turmoil on the streets of Athens as the nation’s parliament debates the austerity plan. The ruling socialists, who secured a vote of confidence last week and enjoy only a thin majority, are expected to pass the measure. Passage of the austerity plan, which includes spending cuts, tax increases, and asset sales, will pave the way for the new multi-year funding program. Another vote is scheduled for Thursday.
In Corporate news, Bank of America (BAC) agreed to pay $8.5 billion to settle claims by a group of mortgage backed securities (MBS) investors. This is the largest settlement related to the subprime lending bubble and the subsequent collapse of 2008. The settlement is signficant as it potentially encourages other investors to bring similar suits against the other major banks, creating a new headwind for the group.
We also have the makings of another hot internet IPO as Zynga, the online social game company, files the paperwork to raise up to $2 billion. The maker of popular games on Facebook such as FarmVille and Mafia Wars has a reportedly better revenue source than LinkedIn (LNKD).
On the earnings front, we had soft results from General Mills (GIS) as high input costs squeezed the cereal maker’s margins. General Mills came inline on EPS, missed modesly on revenue, and provided a weak outlook. Family Dollar (FDO), the discount retailer, also came short of expectations and provided inline guidance.
Growing signs that the Greek issue was heading towards a resolution, howsoever temporary, has been driving stocks higher in the last few days. But the focus will swing back to domestic issues with Friday’s ISM report and next week’s jobs report. A more enduring trend line in the market will emerge only after these reports.
Today’s economic releases include Pending Home Sales which is expected today at 10:00 AM EST, and is expected to increase by 7.9% after decreasing by 11.6% in April and Crude Inventories which is scheduled for release today at 10:30 AM EST.
