For the third year in a row, the rites of Spring include a European panic attack.  Today, it became clear that Spain is going down the same trail as Greece.  While their interest rates have not reached earlier highs, the spread between their rates and the rates of Germany have reached a record high.  The message is that investors   prefer the relative safety of  Germany, even with much lower interest income than they could get buying Spanish bonds.  This is ominous.

Today, the Dow lost 213 points, only the second time this year the Dow has dropped as much.  That makes five days in a row the Dow was down.

In fairness, there were other things spooking the market as well.  For example, the all-important but lousy Jobs Report was released on Friday, when the U.S. stock market was closed.  When we opened yesterday, our market reacted to it by losing 130 points.  As is normal, Europe has more holidays than the U.S. and didn’t open until today.  So, it had to factor in the lousy Jobs Report PLUS the blowout in German-Spanish bond yields . . . two big chunks of bad news in one day.

The fear is that the bear market during the last two summers will be repeated — only much worse because Spain’s economy is much larger than Greece’s.  I am a bit more sanguine about that fear.  There is real value in having a template ready-to-go!  Europe knows what it had to do for Greece and must now do it again, only bigger.  Everything depends on the ability of German leaders to calm the angry German voters.

In addition, we shouldn’t under-estimate the commitment of Fed Head Bernanke.  When Europe got into trouble, he entered into an unlimited currency swap arrangement with the European Central Bank to supply all the dollars Europe needed.  Almost unnoticed is that the arrangement was two-way, which means our Fed could step into the place of the ECB temporarily if necessary.  While politicians in this country will howl loudly and vociferously, I don’t think Bernanke will be swayed from his commitment to prevent collapse, even if he has to save Europe.

The point is — we have tools available that we did not have last year!

Lastly, we are entering “earnings season” when corporations must confess their performance for the last quarter or the last year.  One of the reasons the market has stalled is that analysts have cut their earnings forecasts.

The first company to release results is Alcoa (AA), which they just did, easily beating analysts’ expectations for both revenue and earnings per share.  Because aluminum is closely tied to growth, I expect that news to put some lift into the market tomorrow, not enough to overcome more bad news out of Europe but enough to absorb some of it.

Don’t you miss being young . . . when a young man’s attention turned to affairs of the heart each Springtime, instead of international stock markets?