Greece Continues to Drive Market's Direction

Jim Trippon  |

There were fears at the beginning of this week; centered on whether we were entering into a consolidation period. As I mentioned recently, I don’t see the month of March being that timeframe.

However, I do see a relatively flat month of performance in the stock market lying ahead. Just as we saw this week, the S&P 500 opened up on Monday at 1369 and dropped the remainder of the week to the 1340s based on uncertainty in Greece. BUT on Thursday the S&P managed to regain most of its loss to close at 1365.

Thursday also drew us closer to Greece wrapping up its bond swap with private investors. The Greek government was able to gain acceptance from 85.8 percent of the private creditors, when only 66% was needed to move forward.

The 2/3 minimum participation was required to arrange a legal device to force the remaining investors towards the agreement. Athens should now be able to apply a collective action clause (CAC) that will push the deal on the remaining holders of the 177 billion euros in bonds.

Although Greek debt was the major catalyst for the markets this week, there was some potential market-moving data released on the U.S. economy.

Despite the jobless numbers rising to 362,000, economists were still happy to see new claims near the four-year low from mid-February. The U.S. economy has been able to add 917,000 jobs since September, which is an extremely strong number given the global recession.
In addition, household debt rose in the last quarter of 2011 for the first time in 3½ years. During the same period, we have also seen after-tax incomes rise which, in turn, has lessened the debt burden and put individuals in the driver’s seat to steer the economy down the road of recovery.

On Friday, we will look out the February employment report. The U.S. government expects an additional 210,000 jobless claims from last month.

A consolidation period is in our future, but don’t let your emotions take hold now. It’s more important than ever to stick with our methodology on ETF investing instead of being guided by market sentiment.

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