STOCKS JUMP AND THERE'S STILL NOTHING SOLVED IN EUROPE: Here's What You Need To Know

High Jump

So, the earth-ending Greek referendum is still on. But stocks managed to recover some of yesterday’s losses.

First, the scoreboard:

Dow: +177.8 pts, +1.5%
S&P 500: +19.6 pts, +1.6%
NASDAQ: +33.0 pts, +1.3%

And now, the top stories:

  • It’s been two days since Greek PM Papandreau first announced Greece would would hold referendum on the country’s bailout package.  In overnight developments, Papandreau said membership to the euro would also be part of the referendum.  We also learned that the PM had the backing of his cabinet.  All of this is threatens to delay the next tranche of Greece bailout cash.  This is an imminent concern because Greece has some big debt payments coming up.  German Chancellor Angela Merkel and French President Markozy want to talk all of this over with Papandreau before the G-20 meeting kicks off tomorrow.
  • New contractionary economic data across Europe including unexpected deterioration in the German labour market were discouraging. However, U.S. labour market data was a bit more encouraging.  According to Challenger grey and Christmas, announced layoffs dropped in October.  Also, ADP said the private sector added 110k jobs in October, beating the estimate of 100k.  September’s ADP figure was revised up to 116k from the previous reading of 91k.
  • Stocks opened higher and traded positively all day.  Leaders included the financials.  Bank of America jumped 5%.  Morgan Stanley, Goldman Sachs, and JP Morgan all climbed 3%.
  • MasterCard announced better-than-expected earnings.  Even though consumer sentiment has been weak, especially in the U.S. and Europe, consumers continue to swipe away. MasterCard is also benefiting from the shift from cash and checks to debit and credit cards.  The stock jumped 7%.
  • The Federal Open Market Committee (FOMC) end its two-day meeting today and published its statement 12:30 pm.  There were no major developments.  The near-zero benchmark rate policy was unchanged.  However, it was notable to see that dovish Fed president Charles Evans voted against the committee because wanted “additional policy accomodation.”
  • Like everyone else, the Fed saw the economy pick up modestly.  But they also warned significant downside risks remained.  They also revised down its economic outlook.  GDP growth estimates for 2011 and 2012 were lowered to 1.6%-1.7% and 2.5%-2.9%, respectively.  They boosted their unemployment rate expectation to 9.0%-9.1% from 8.6%-8.9%. Fed Chairman Ben Bernanke, in his post meeting press conference, attributed weakness in the economy to “bad luck.”  He also said the Fed two tools: MBS purchases and increased communication.
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