{+++} Equities endured a broad sell off which saw the S&P 500 drop 1.8%. Bearish sentiment built into the afternoon as the likely deadlock in the Italian general election weighed on markets.
Stocks got off to a higher start as early “instant polls” suggested Bersani, who is a supporter of reforms started by Mario Monti, was destined for full control of the government. This was welcomed by European markets, which rallied and saw Italy’s MIB climb 4.0%. The risk-on bias was confirmed by the bond market where Italian bonds were bid, and the 10-yr yield slid 27 points.
However, once the initial reports were followed by exit polls indicating a much closer race, European markets surrendered the bulk of their gains. Italian yield climbed back into positive territory, and U.S. equities slid off their opening highs. As of the U.S. close, official results remain unclear.
So once some of this European uncertainty gets clarity, I’m sure stocks will rebound. This really isn’t a big deal in the big picture, but as I always say the market will look for any reason to let some air out, especially as overbought as it was.