The Financial Sector is under heavy selling pressure once again after European Bond-Spreads fuelled fears that things in Europe are not as pretty as investors wish it to be. As the Atlanta Fed notes in its latest comments, European bond spreads have, for the most part risen and remain elevated since the August FOMC meeting. As of today, the Ireland-to-German spread has increased to 418 bps, and the Portugal-to-German spread has increased to 402 bps - both new records.
On top of that, the release of the existing home sales data for August is showing an increase in inventory by 1.5 % YOY and the year-over-year increase in inventory is especially bad news because the reported inventory is already historically very high (around 4 million), and the 11.6 months of supply in August is far above normal. As calculated risk notes in its latest report, inventories will put downward pressure on house prices.
The implication for the overall market is that this correction could last a little longer. Looking at the SPY (S&P500ETF), we can assume that it will be difficult to hold the support around 112.51. If this is the case, the market will likely test the next support at around 109.51.
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