Thursday, February 16, 2012 9: 09 a.m.
DJIA: 12,780.95 S&P 500: 1343.23
Guess Yogi was prescient with his, “ain’t over until it’s over” wisdom, as we are seeing the transfer of rescue funds to Greece hitting one snag after another. Greece must receive the second bailout money soon if it is going to meet its 14.5 billion euro bond payment on March 20. European finance ministers will meet February 20 (Monday, a holiday in U.S markets) to discuss the second bailout (again !).
CONCLUSION: I didn’t like the drop in the euro from positive to negative yesterday before the open and said I expected a brief correction which got its start with a 97-point drop in the DJIA. In addition to new snags in rescuing Greece, Moody’s put Bank of America (BAC) and Goldman Sachs (GS) “on review,” not exactly a vote of confidence in the U.S. bankers, but probably expected.
All this injects “uncertainty” into the stock market at a time it has logged in a mid-December to mid-February uncorrected 11% up move. We are now at risk of more than a “brief correction.” How much depends on what hits the market in coming days. (Note: small corrections can become more severe depending on the news that hits it after a small, normal correction is underway).
We have a key meeting in Europe on Monday, the third day of a three-day weekend, which throws cold water on the stock market’s ability to post any meaningful gains today and tomorrow. From her on in, we simply cannot trust ANY info out of Europe about a second Greek bailout until the money actually changes hands. It is beginning to look like the European finance ministers are looking for a way out of this deal, ergo a Greek default.
I don’t think they would bail if they didn’t feel they could concurrently prevent a serious fallout from a Greek default that jeopardizes the entire European Union, but common sense applied to this issue is becoming suspect.
TODAY and tomorrow: U.S. economic reports this morning should help temper the disappointing news out of Europe, but uncertainty going into a three-day weekend stands to press stock prices lower by Friday’s close. Housing Starts notched up 1.5% in January, the Producer Price Index is well contained at its latest read, and Jobless Claims dropped another 13,000 in the week ended Feb. 11.
We are at risk of seeing a drop to DJIA 12,510 (S&P 500: 1315) by Friday’s close.
This will be a busy week for economic reports, what’s important is that there is no serious evidence of slippage in the U.S. economic recovery which is one of the key reasons for the stock market’s recent strength.
- Retail Sales (8:30 a.m.): Up 0.1 pct in Dec, 0.4 pct in November and 0.7 pct in October, however latest strength came from autos, up 1.5 pct.
- Export/Import Prices (8:30 a.m.): Trending down in last 5 mos.
- Business Inventories (10 a.m.): Inventory/sales ratio unchanged last 5 mos.
- MBA Purchase Applications (7 a.m.): Measures mortgage applications at lenders
- Empire State Manufacturing Survey (8:30 a.m.): Rose sharply in December and January.
- Industrial Production (9:15 a.m.):
- Housing Starts (8:30 a.m.): Dropped 4.1 in December after a 9.1 pct rise in November.
- Jobless Claims (8:30 a.m.): Dropped another 15,000 for week ended February 4, bringing the 4-week average down to366,250.
- Producer Price Index (8:30 a.m.): Dropped slightly in December after November bounce.
- Philly Fed Survey (10 a.m.): Notched higher in January, though new orders were off
- Consumer Price Index (8:30 a.m.): Unchanged in December for second month in a row reflecting lower energy costs.
- Leading Indicators (10 a.m.): positive
Jan 23 DJIA: 12,720 "Europeans Seeking Long-Term Economic Cure"
Jan 25 DJIA: 12,675 "Consolidation, Correction Likely though US Stocks Hold Strong Against EU Turmoil"
Jan. 26 DJIA: 12,756 "Fed Would Raise Interest Rates If Inflation Picks Up"
Jan. 27 DJIA: 12,734 "Warning! Tradable Market Action Lies in Waiting"
Jan. 30 DJIA: 12,660 "“HUGE” Week for Economic Indicators"
Jan. 31 DJIA: 12,653 "All That Is Needed Is a Spark"
Feb. 1 DJIA: 12,632 "Week’s Economic Reports Could Be The Springboard"
Feb. 3 DJIA: 12,862 "Investors Beating the Bullish Tune"
Feb. 6 DJIA: 12,845 "Follow the Money as It Exits Safe Havens"
Feb. 7 DJIA: 12,878 "Market Held Up By Sneaky Buying"
Feb. 8 DJIA: 12,883 "Is It Safe For Bulls to Come Out and Play?"
Feb. 9 DJIA: 12,890 "BIG Money Buying the Future"
Feb. 10 DJIA: 12,801 "Can a Greek Deal Be Accomplished Over the Weekend?"
Feb. 13 DJIA: 12,874 "Easy Does It! Some Selling Into Good News Expected"
Feb. 14 DJIA: 12,878 "Investors Should Expect “Market Churn”"
Feb. 15 DJIA: 12,780 "Market Churn to Include Brief Correction"
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