The Bond Market (re Europe) is very powerful. Beware.

Bond markets determine the interest rate that a borrower must pay to borrow.  In the 1990's, when President Clinton attempted to increase the US budget deficit, the "Bond Market" reacted negatively with such force (rising interest rates) that Clinton was forced to abandon the strategy and instead balance the budget.  His political advisor, James Carville was quoted as saying.

“	I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.	”
— James Carville, political advisor to President Clinton Rising interest rates in Italy, Spain, France and many European countries other than Germany threaten economic growth. The Bond Market sees risk of default and demands higher interest. High interest rates paid by governments lead inevitably to higher taxes, which tend to reduce economic growth. Rising interest rates and lower economic growth are bad for stocks, so stocks tend to decline. So the Bond Market does indeed have a powerful influence. At some point, the process tends to be self compensating in that lower growth leads to less demand for credit--more cash, and lower interest rates. So far, rising rates in the weak European countries has led to LOWER interest rates in the US as money seeks a "safe haven". Sooner or later, when interest rates go high enough, governments tend to cut spending. This reduces borrowing and interest rates fall.  Since, bond prices change in the opposite direction of interest rates--the Bond Market loves falling interest rates because bond prices go up and participants sell bonds at a profit. Whether it be the stock or bond market, people that try to make their living speculating or trading love volatility. Perhaps that is why we are seeing so much of that lately. Be aware that the US is not immune from rising interest rates and pressure from the Bond Market.  Right now, the Bond Market is focused on Greece, Italy, and Spain.  With continued deficits, it may not be long before we become the focus of the Bond Market with rising interest rates. Owning bonds is not much fun when interest rates rise rapidly. Keep in mind that bonds being sold by Italian and Spanish governments are yielding close to 7% interest and they are selling about all that they need to sell. And, a lot of people are spending a lot of money buying these bonds--the majority of them assume that: A) they will get the 7% interest and a return of principal as agreed; and/or B) Interest rates will fall, bond prices will rise, and they will sell for a profit.