The major U.S. stock market indices have been mixed over the last few days due to renewed uncertainty regarding the European sovereign debt crisis. By market close on Thursday, April 5th, the Dow Jones Industrial Average (DJIA) index ended down 14 points to 13,060 while the NASDAQ Composite increased 0.4 percent to 3,080.50. The S&P 500 decreased 0.88 points to 1,398.

Earlier this week, the country of Spain held a bond auction for private investors which generated less interest than anticipated. On Wednesday, the country was able to sell €2.6 billion in 10-year sovereign debt notes, which was on the bottom end of the expected range of €2.5 billion to €3.5 billion set by analysts. By Thursday afternoon, yields on those bonds were 5.8 percent due to investor concerns on the federal government’s budget deficit.

Borrowing Costs

Now that the Greek sovereign debt issues have temporarily been covered, attention has now focused to increased borrowing costs for other EU nations such as Spain. When a sovereign country’s expenses escalate in the form of higher interest rates, the nation must pay out a higher rate for money that has been loaned to it in exchange for bond notes.

Although the European Central Bank authorized a record €489 billion emergency loan package to struggling regional financial institutions late last year, the money banks received did not go exclusively to absorb Eurozone sovereign debt nor was it all earmarked for loans. Despite the ECB’s action to extend seemingly limitless funds to banks at 1% interest, the central bank did not offer the same terms to countries, which has placed banks in the driver’s seat when it comes to controlling how and when those funds are dispersed.

Analyst Reactions

In an article published by CNN Money Thursday, Hadrian Partners market strategist Nick Kalivas said, “Credit concerns are flaring given the rise in Spanish bond yields. It feels like the sovereign debt crisis is surfacing again.” Western Union Business Solutions market strategist Karl Schamotta told CNN Money Thursday that “traders may soon be forced to operate without a safety net for the first time since the 2008 collapse. The implications will be profound.”

A separate article published by Bloomberg.com noted that initial unemployment claims in the United States fell to a 4-year low this week at 357,000 as more than 200,000 jobs may have been added in the month of March. “You have, certainly, improvement in the labor market in the U.S. but every once in a while we got reminded there still remain problems in Europe,” said Greg Woodard, a portfolio strategist at Manning & Napier. “The volatility is going to continue. It’s going to be choppy. The trend seems to be improvement in the U.S. and continued difficulties outside the U.S.”

Dow Jones Performance

Despite Thursday’s lackluster performance, the Dow 30 has enjoyed a healthy 6.9 percent Year To Date gain from its 2011 closing level of 12,217 while the NASDAQ 100 and S&P 500 are both up over 10% so far in 2012. The Dow Jones index, which is comprised of 30 large cap component stocks, has traded in a 52-week range of 10,404.49 to 13,297.11 points.

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