For Today, the Pain Remains in Spain

Stocks will likely give back some of the Tuesday gains as concerns about Spain’s ability to manage its banking problems take center stage. A credit rating downgrade of the country on an otherwise slow-news day will not help either. The domestic economic calendar is on the thin side today, as most of the top-tier economic reports are coming out on Thursday and Friday.

The market is keenly waiting for the May non-farm payroll report coming out Friday morning and the preview of that report in Thursday’s reading from Automatic Data Processing ( ADP - Snapshot Report ) , the payroll processor.

But the spotlight today will firmly remain on Spain, whose government announced the other day a €19 billion bailout of the troubled bank Bankia. The government appeared to be banking on funds from European Central Bank (ECB) for recapitalizing the bank, but stepped back from that move after resistance from the central bank. The government now plans to raise the funds through the markets by auctioning treasury bonds, but its ability to achieve that goal at competitive rates is becoming increasingly difficult given the persistent uptrend in bond yields.

The rating downgrade by Egan-Jones Rating of the country’s sovereign credit profile into junk category is not helpful to that goal either. Bottom line, Spain is in the headlines for all the wrong reasons, and that’s not good for the market today.

In corporate news, shares of BlackBerry maker Research In Motion ( ) will be in focus today after the company pre-announced a surprise loss in the current quarter on Tuesday. The company also announced the hiring of investment bankers to help them sort out ‘strategic alternatives.’ Given the dire straits the company is in, it is inconceivable that any existing industry player will step up to buy them out.

RIMM is coming out with a new version of BlackBerry this year, but the company has been fast losing ground to competing products like Apple’s ( AAPL - Analyst Report ) iPhone and handsets that use Google’s ( GOOG - Analyst Report ) Android operating system. Earnings estimates for the current quarter have been steadily coming down, but the company was still expected to report positive earnings of 41 cents for the quarter, which has come down almost 40% over the last three months.