Market on tenterhooks
by Peter Switzer
Wall Street was in no man’s land not wanting to buy and not wanting to selloff ahead of some big US news out this week on how the Yanks will cut down their deficits and debt. And then there is the continuing Euro-anxiety with some good news still having to counter the enormous black cloud that still hangs over the EU.
But it’s still good that the market didn’t selloff, despite the fact it’s on tenterhooks.
The Dow was up 25.5 points or 0.22 per cent to finish at 11,796.23 and is now up 1.89 per cent for the year. Meanwhile the S&P 500 was down 0.4 per cent — let’s call it flat — and is down 3.34 per cent for the year, though it lost 3.81 per cent last week alone.
Fear-wise the VIX is at 32 and this underlines the fact that the market is still jumpy. A reading under 20 makes me more comfortable that stocks are more likely to head up then down on average.
The big test
This week the so-called Super Committee faces a November 23 deadline to come up with the plan to cut back the US deficit by $1.2 trillion. This has the potential to spook the market but I believe Europe remains the big market test.
Here there has been some better news with Italy’s new technocrat government announcing a reform agenda.
Meanwhile there’s talk or rumours about the European Central Bank lending money to the IMF to help debt-laden governments but these have been met with denials.
Many experts believe the ECB has to play a Fed-Bernanke game and throw money at the problem but the Germans and the ECB are reportedly not keen on the idea.
I suspect there is a reluctance to sell shares off because there is a belief that the ECB will come up with a surprise action to help bring bond yields down when the time is right — whenever that time is.
Economic activity in the U.S. climbed 0.9 per cent in October, a sixth straight gain, according to the Conference Board. Economists surveyed by Reuters had expected the index to rise 0.6 percent.
Apart from the political threats to stocks this week in both the USA and Europe, the Yanks have a solid run of data including economic growth, durable goods orders, home sales, consumer sentiment and Black Friday, which is the first day of retail sales for the US holiday season, which kicks off on Thursday’s Thanksgiving Day.
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Published on: Monday, November 21, 2011
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