Only a month ago, surprisingly strong corporate earnings and steady growth in the U.S. economy had investors in a cheery mood. The Dow Jones industrial average stood at its highest level in more than four years.
Then everything unraveled.
First it was worries about Greece dropping the euro currency. After that came fear that Spain would fail to save its weakened banks. And then Friday's bombshell, a dismal U.S. employment report: The country added just 69,000 jobs last month.
The jobs report sent the stock market to its worst decline of the year, including a 275-point drop in the Dow Jones industrial average, leaving that index down for the year.
The Associated Press asked three market experts to weigh in on the jobs report, what's in store for the markets in the weeks ahead _ and where there might even be signs of hope.
Here's what they had to say.
ON THE JOBS REPORT:
Paul Zemsky, global head of asset allocation at ING Investment Management:
Any way you look at today's report, it's disappointing. Payroll growth was 69,000 versus expectations of 150,000. And April wasn't as strong either. Average hourly earnings, the average wage rate for people across the country, is only up 1.7 percent year over year. In June 2007, it was running at 3.8 percent, so wage growth is half of what it was before the Lehman Brothers collapse and the financial crisis. It's just not good.
Dan Greenhaus, chief global strategist for the brokerage BTIG in New York:
There was always expected to be some weather-related payback. Hiring strength in the winter that a lot of people thought had to do with warmer weather was expected to be paid back in the spring. ... But this was weak through and through. The thing is, winter weather can't explain everything here. Are businesses worrying about Europe? Since we're growing so thinly, the odds of a recession are going up. But I don't think we're headed to a recession yet.
Lawrence Creatura, a stock portfolio manager at the mutual fund giant Federated Investors:
The jobs report was just bad. ... What we're seeing is that the job market, post-financial crisis, has not been able to reignite itself. It hasn't been able to set off that chain reaction where an improving economy creates more jobs, and more jobs improve the economy, creating more jobs. That hasn't started yet.
ON THE MARKETS, LOOKING BACK AND AHEAD:
The fear isn't about Greece itself but what it could trigger. You're seeing money getting pulled out of Greek and Spanish banks. If Greece leaves the euro, Europe could get a full-blown banking crisis on its hands.
The European Central Bank is supposed to be the lender of last resort, but only if banks have good liquid assets. If the deposits are gone, then there's no assets to support the ECB's lending. ... Markets push governments to the brink and they react. Hopefully, policy-makers have learned that it's better to be preemptive instead of waiting around till after the dam breaks.
Reality happened. The idea took hold at the start of the year that this was a self-sustaining recovery. And then came Europe, and worries about interlinkages in the banking system.
While Greece is a problem, it's a small one compared to Spain. Spain is the fourth largest economy in Europe, one of the largest in the world, and if they have trouble financing themselves, then the global economy is going to be in real trouble.
This month, just because the calendar turned doesn't mean the problems go away. There are Greek elections June 17 that everybody will be watching. You also have to believe the Federal Reserve is going to do something. If things are getting worse, the odds of another round of quantitative easing go up.
We finished up the earnings season, and they were quite good. Company earnings aren't the problem. What happened was that investors' expectations for the future downshifted. Specifically with the spotlights on Europe and China. Fears about the world economy were reborn in a way that was very similar to what happened last year at the same time.
Europe's debt crisis is like a vampire. It just keeps coming back when you think it's finally dead. We haven't been able to find a stake to put through its heart yet.
THE BRIGHT SIDE:
Right now it's hard to come up with reasons for optimism. I think we haven't seen the effects of lower gas prices yet. That'll start trickling through soon. And it's still the case that the U.S. is better off than Europe. The U.S. is just quicker on policy. Our economy is growing. You can't say that about most of Europe. Look at Italy, Spain, Portugal, even the U.K. _ they're not growing.
There's little reason to be optimistic about Europe. Policymakers have handled it so badly, there's no reason to think they'll start improving now. The U.S. still looks better by comparison. The U.S. isn't the worst place to be invested right now. But that's not saying very much. On the other hand, if you're in Treasurys, you're doing awesome.
There's one thing to be certain of: Things will change. This is a dynamic system. When one piston goes down, another goes up. For every action, there's an opposite reaction.
Yes, global declines in asset values are painful. However, those declines include commodities. Oil, for example, is now 20 percent cheaper than it was last month. Expect to see that at the gas pump soon. That acts like a tax cut. There is a glass half full here. But I admit you have to squint pretty hard to see it today.