DJIA: 11,808.79 S&P 500: 1238.25
Progress was made over the weekend at the European summit meeting in Brussels, but nothing conclusive. Looks like we have to wait for the next meeting which will take place Wednesday, Oct. 26.
Global stock markets have received this news well with some guarded buying tempered by speculation about what to expect Wednesday, i.e. is it safe to buy in anticipation of a European “deal” after the stock market has run up so much (13%) in less than three weeks ?
Since some traders will “sell the news” of a Euro-solution, there is risk in buying now.
What is needed is an agreement that addresses both short and long-term bank and sovereign debt issues. From what I can glean from print and television interviews is a solution is going to take time, it isn’t going to happen Wednesday.
As best as I can conclude, that means continued volatility and risk of another round of fear that Greece, Spain, or Italy will cross the threshold where default is a real possibility.
Beyond Wednesday, I expect the focus to return to the United States and corporate earnings, the SuperCommittee (see below), and efforts to reignite economic growth, either Fed-induced or through government initiatives.
Through Oct. 11, some 75% of the S&P companies reporting Q3 earnings have beaten estimates, which is fine though analysts and CEOs now low-ball projections and guidance to avoid a disappointing miss.
With the DJIA at 11,541 Friday, I said I expected the DJIA to reach 11,950 ( S&P 500: 1255) “IF” the Europeans can get it right. It rose 267 points, leaving about 142 points to reach that level. That remains my upside target. A disappointing plan could drop the DJIA to 11,240 (S&P 500: 1185).
The SuperCommittee has been lost in the shuffle, upstaged by international financial worries and the state of our economy here at home. Nevertheless, it will raise its ugly head to remind us whether our government is, or is not, dysfunctional.
12-member SuperCommittee timeline:*
Oct. 1- Dec. 31: Both houses of Congress must vote on a Balanced Budget Amendment.
Oct.: 14: Deadline for House and Senate Standing Committees to submit recommendations.
Nov. 23: Deadline for both houses to vote on a plan with a 10-year deficit reduction goal of $1.5 trillion Dec. 2: Deadline for committee to submit report and legislative language to President Obama andCongress.
Dec. 23: Deadline for both houses to vote on committee bill.
Jan. 15, 2012: Date that the “trigger” leading to $1.2 trillion of future spending cuts goes into effect if
the committee’s legislation has not been enacted.
Feb. 2012: Approximate time when first $900 bn of debt ceiling runs out.
Feb./Mar.2012: Deadline for Congress to consider a resolution of disapproval for the second tranche
($1.2 – $1.5 trillion) of debt limit increase.
Fall/Winter 2012: When additional $2.1 - $2.4 trillion of borrowing authority from this law runs out.
Jan.2, 2013: OMB orders sequestrations for defense and non-defense categories of spending necessary
to meet spending cuts required by the “trigger.”
Recent blog headlines:
Oct. 3, DJIA: 10,913, “Almost Ugly Enough for a Buying Juncture”
Oct. 4, DJIA: 10,654, “ Marching to Europe’s Drumbeat – October Opportunity Looming”
Oct. 5, DJIA: 10,808, “ News Whipsaw Becoming Problem for Bottom Watchers”
Oct. 6, DJIA: 10,939, “Rally Entering Area of Resistance. Euro-Rally a Fake out”
Oct. 7, DJIA 10,939 , “Traders’ Sell – Investors - Defer Purchase”
Oct. 10, DJIA: 11,103, “Euro-Fog Lifting – Street Looks to Q3 Earnings”
Oct. 11, DJIA: 11,433, “Easy Does It – Market Needs BIG Buying to Advance From Here”
Oct. 12, DJIA: 11,416, “Looking Beyond This Mess”
Oct. 13, DJIA: 11,518, “180-Degree Change in Expectations – No Room for Surprises”
Oct. 14, DJIA: 11,478, “Europe Still the Key – Q3 Earnings Run a Close Second”
Oct. 17, DJIA: 11,644, “Snags En Route to Euro-Solution to be Expected”
Oct. 18, DJIA: 11,392, “Test of the October 4 Rally’s Strength”
Oct. 19, DJIA: 11,577, “Best Six Months Looms, But Volatility to Continue”
Oct. 20, DJIA: 11,504, “All Eyes on Euro-Summit this Weekend”
Oct. 24, DJIA 11,541, “DJIA 12,000 “IF” the Europeans Can Get It Right”
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