Business News

Bad news, but Wall Street up!

| More

by Peter Switzer

Why would you trust Wall Street as a reliable guide to what’s really going on? You can’t always, but maybe you can if you get a run in stock prices up or down.

So, why the cynicism towards the indicator I most use for predicting both short- and long-term trends? Well, yesterday the Street’s expert movers and shakers were worried about the credibility of the Spanish bank bailout but today the index is up over 100 points.

The Dow ended up 162.57 points or 1.31 per cent to 12,573.8. Meanwhile the S&P 500 index put on 15.25 points or 1.16 per cent to 1324.18.

So, how come? Let’s investigate. This is what looked like market-moving news:

Fitch downgraded 18 Spanish banks
It also lowered Spain’s sovereign credit rating to BBB
Spain’s 10-year bond went to 6.807 per cent, which is the highest since the country joined the eurozone
Greek election fears remain for Sunday
European shares went higher ignoring Fitch
Small business optimism dipped a bit but nothing dramatic.

As you can see, there was precious little to explain why Wall Street sold off on the bailout news for Spain but then they buy when Fitch downgrades Spain and its banks!

The reality is that techies say the key indexes seem to be making a credible bottom, which leaves them poised to shoot higher if the Greek election makes optimists look sensible.

As I said yesterday, we’re awaiting key news on Europe, the USA and China but the European Union is the main game and we have to hope that the voters in Greece and the 17 countries’ leaders of the eurozone can convince the market players of the world, and more importantly, the ones on the sidelines with cash, that stocks are the place to be.

They have to do a bit a work over the next few months to pull that one off!

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Watch more from Peter on SWITZER TV.

Published on: Wednesday, June 13, 2012

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

It’s not All Too Hard, it’s More Joyous!

Abbott deserves a Tony Award for that speech!

When do we dump stocks?

Abbott’s budget reply: is he really trapped?

Budget 2013: what are the real issues?