NORMAN — A bailout of the crippled banks of Spain should relieve world financial markets and provide a lift for stocks in the United States, which have had a rocky six weeks because of investor concern about Europe.
But any boost will be short-lived, market experts said Sunday, unless Europe comes forward quickly with more bold action to reassure the world that it finally has a grip on its almost three-year-old debt crisis.
“I think what we’re all trying to figure out right now is, is this the end of the concern? Are we tracing out a bottom or a bear?” said Sam Stovall, chief equity analyst at S&P Capital IQ, a market research firm.
Investors will have their first chance to react to the bailout as markets open today.
The package includes loans of up to $125 billion for Spanish banks from Spain’s European neighbors. It is similar in concept to how the U.S. government shored up banks in 2008 with the Troubled Asset Relief Program, or TARP.
Despite the turmoil in Europe, last week was the best of the year for U.S. stocks. The Standard & Poor’s 500 index rose 3.6 percent, partly in anticipation of a Spanish bank rescue. The fact that it wasn’t a surprise might limit the further jump for stocks, Stovall said.
Peter Tchir, manager of the hedge fund TF Market Advisors, said he expects a rapid gain this week for many investments, including U.S. and European stocks and bonds issued by Spain and other troubled nations.
He said he expects traders to sell traditionally safe investments like U.S. Treasurys and German bunds, which already are paying zero interest on five-year debt. Selling would drive down prices and drive up interest rates.
For riskier investments like stocks, “We’ll get a brief rally (today) or Tuesday,” Tchir said. “Then people will sit around saying, ‘What comes next?”’
As fear about Europe intensified or eased in recent weeks, traders returned to a pattern of selling or buying risky assets based on headlines from overseas, with little regard to the specific investment.
As stocks move in lockstep, they are more likely to rise and fall quickly and broadly. The three biggest weekly moves this year for the S&P — two down, one up — have all come in the past month.
Such tight correlation between investments also signals “a crisis coming to a conclusion, rather than just beginning,” Stovall said.