Stocks closed flat to end the week. But huge macro concerns in Europe and the U.S. continue to brew.First, the scoreboard:
Dow: +25.5 pts, +0.2%
S&P 500: -0.5 pts, -0.0%
NASDAQ: -15.5 pts, -0.6%
And now, the top stories:
- As Europe teeters on the brink, pressure is mounting on the ECB to act fast and aggressively. Germany and its Chancellor Angela Merkel have been against increased ECB involvement in any eurozone bailout. Nomura’s Bob Janjuah doesn’t think the ECB will come in as a lender of last resort for the eurozone without the Germans’ backing. Even if the ECB were to move forward, Janjuah thinks any efforts would be futile.
- But there is also no shortage of proponents of increased ECB participation. PIMCO’s Bill Gross thinks the ECB “Must write checks; trillion dollar ones.” Deutsche Bank’s Jim Reid thinks there’s no better option. Reid says, “If you don’t think Merkel’s tone will change then our investment advice is to dig a hole in the ground and hide.” Societe Generale’s Dylan Grice went as far as to say that tight monetary policy in Germany once stoked soaring unemployment, social unrest, and the rise of the Nazis.
- Dow Jones revived a rumour that the ECB would lend money to the debt-laden sovereigns via the IMF. This was a market-moving rumour that was initially floated and shot down yesterday.
- Anyway, as the debate over ECB involvement rages on, Europe continues to deteriorate. Just this morning, we learned Italy’s industrial orders fell 8.5% month-over-month in September, which was worse than the 6% decline expected by analysts. However, yields on Italian bonds were relatively subdued as the ECB has been purchasing bonds in the secondary market.
- In the U.S., we had some better-than-expected economic data. October leading economic indicators jumped 0.9% versus the 0.6% expected. This reaffirmed expectations for U.S. economic growth.
- But domestic debt problems and political turmoil persist. There are concerns the the U.S. congressional super committee will fail to come to an agreement on a $1.2 trillion deficit reduction plan before the November 23 deadline, which is now less than a week away. Failure to agree on a plan would trigger $1.2 trillion worth of automatic spending cuts in 2013. Societe Generale warns this could lead to a recession in 2012 and another S&P downgrade of the U.S. sovereign debt rating.
- The Nasdaq underperformed the U.S. indices today. Shares of Salesforce plummeted 12.7% today after it posted a Q3 net loss and disappointing guidance for Q4. Salesforce was also the biggest loser in the S&P 500.
- Don’t Miss: 15 Companies That Will Get Smashed If Europe Goes Bust
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