So far, 2012 has been a swell year for investors, as stocks have taken off. Over the past week, we saw markets cheering a proposal by the International Monetary Fund to raise $600 billion in new funds to help it address the eurozone debt crisis. Strong earnings results from financial companies such as Goldman Sachs and Bank of America as well as tech bellwethers like IBM and Intel also helped drive stocks forward.
Stocks rising, bulls rampant are motifs you might pick if designing a coat of arms for Wall Street at the moment. But the motto should read: Caveat emptor. Yes, buyer beware.
So far, 2012 has been a swell year for investors, as stocks have taken off. Over the past week, we saw markets cheering a proposal by the International Monetary Fund to raise $600 billion in new funds to help it address the eurozone debt crisis. Strong earnings results from financial companies such as Goldman Sachs and Bank of America as well as tech bellwethers like IBM and Intel also helped drive stocks forward.
For the week, the Dow Jones Industrial Average (INDEX: ^DJI) tacked on 2.4%, while the broader Russell 3000 added 2.1%. The specific sector earnings results as well as a general move toward growth-oriented industries helped push the gains in a few sectors above the average.
The market will tell us if it cares or not. So far, it looks like institutions are steady buyers of blue chips regardless of what happens in Europe. The only reason for not buying reasonably priced stocks would be the potential adverse impact of contagion in European bank and financial markets. Fear of that, has forced a lot of investors to buy U.S. government securities for the safety they offer even though yields are next to nothing.
Safety is the only reason to hold those securities. Remove the European contagion risk and that money will move out of bonds into stocks. I think some of this year’s buying reflects investors anticipation of that.
Negotiations between Greece and its private creditors continues as the beleaguered country faces the payment on March 20 of 14.4 euros, in order to avoid default and enable financial help from the EU and IMF. This affects only private investors, who hold 59% of Greece’s billion euro net government debt. The ECB, IMF and official creditors aren’t’ involved in the negotiations.*
According to “Bloomberg View,” Greece’s woes will continue regardless of the outcome of negotiations, its debt burden is too large. Greece would have to reduce its debt burden by 20 billion euros a year, equal to two-thirds of its spending on social programs.
European finance ministers meet Monday to address bank and sovereign debt issues in general, as well as clauses in new bond issues that would prevent certain investors from blocking restructuring. The World Economic Forum meets next Wednesday following the World Bank’s dire economic forecast for 2012. Expect the headlines next week to be dominated by “Europe.”
The only thing that HAS NOT CHANGED in this European crisis is its persistence to resurface after it appears that the imminence of a meltdown is fading. I have only touched the surface of events here, Its complexity defies reasonable conclusion regarding the outcome – solutions or contagion.
There are currently 17 eurozone nations. My “guess” is that 17 will become 16 or 15 via a “controlled” defaults. Just a guess. I do think the urgency to avert a widespread meltdown will force European leaders to employ some tough love solutions and that may come without a scary shakeout or with one, a catharsis of sorts. Just too much at stake, globally to let “uncertainty” persist at the expense of world economies
We are going into the weekend with a Monday meeting of the European Finance Ministers and a Wednesday meeting of the World Economic Forum. Both will feature press coverage and commentary by pundits that could cast a pall on global stock markets. read Govt Bond Sales Dates january 23 -27 2012
Without the “European” problems, our stock markets would press upward, gaining traction as money moves in from the sidelines. It may do so even if Europe’s problems continue.
If buyers just step back for a few days to get a better handle on what comes out of next week’s meetings, the DJIA could slip back to 12,410 (S&P 500: 1289).
What’s important for U.S. economic indicators going forward is that they continue to show traction. Much of the stock market’s positive tone since mid-December is based on the improvement in our economy and the hope that its strength can override Europe’s bank and sovereign debt woes. read major companies Earning report january 23-27 2012
This week’s economic reports need to confirm the positive trend.
Tuesday:
(8:30 a.m.) Empire State Manufacturing Survey of 175 manufacturing executives regarding regional business. It has been rebounding following an April to October slump.
Wednesday
(8:30 a.m.) Producer Price Index: Has been bumping along sideways for a year. Today’s report for December showed a 0.1 percent drop at an annual rate vs. a 0.3 percent rise in November.
(9:15 a.m.) Industrial Production. Declined in 0.2 percent in November after October surge of 0.7 percent. December’s report show a gain of 4.0 percent.
(10 a.m.) Housing Market Index a survey concerning the economy and housing market conditions including current house sales, six months projected sales and the traffic of prospective buyers of new homes. It jumped two points in December for the third straight gain.
Thursday:
(8:30 a.m.) Jobless Claims
(8:30 a.m.) Consumer Price Index: Was unchanged after declining 0.1 percent in October.
(8:30 a.m.) Housing Starts: Rebounded 9.3 percent in November, suggesting a flicker of light in this beleaguered industry.
Friday:
(10 a.m.) Existing Home Sales: Jumped 4 percent in November though included some distortion caused by an annual revision. Source http://editorial.equities.co ) For the latest updates on the stock market, visit Stock Market Today For the latest updates PRESS CTR + D or visit Stock Market news Today
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