Photo: Emmett Tullos via Flickr
So, EU leaders surprised all of the naysayers by actually making some progress at yesterday’s summit.First, the scoreboard:
Dow: +339.4 pts, +2.9%
S&P 500: +42.6 pts, +3.4%
NASDAQ: +88.0 pts, +3.3%
And now, the top stories:
- In case you missed it, here’s a rundown of yesterday’s EU summit because it’s important. Leaders have agreed to 50% writedowns on Greek debt held by private bond holders, a leveraged EFSF that would have $1.4 trillion in firepower, and a minimum 9% core capital ratio for euro area banks. Banks will need an extra $147 billion to recapitalize. French President Nicolas Sarkozy also said the EU would reach out to China’s Hu Jintao.
- The news out of the summit has been getting mixed reviews by analysts. But based on today’s monster market rally, overall sentiment seems to be extremely positive.
- But this doesn’t mean all of Europe’s problems are fixed. There’s the whole issue of actually implementing any of these proposals. Among other issues still hanging out there is whether the Greek writedown constitutes a credit event triggering CDS. We also note that the spread between Italian and German bonds remain incredibly high, which is worrisome.
- We got some economic data today. The first reading on Q3 GDP came in line at 2.5%. The personal consumption expenditures component of GDP jumped 2.4%, which was well ahead of the expectation for 1.9%. Initial jobless claims declined modestly to 402k, which was in line with estimates.
- Pending home sales missed estimates by a wide margin, falling 4.6%. But markets seemed to have ruled this as a one-off as homebuilder stocks rallied.
- Banks all over the world won big in today’s bull rally. French banks went bonkers. In the U.S., Morgan Stanley was the big winner today, soaring 17%. Goldman Sachs, Bank of America, and Citigroup all book gains of over 9%.
- However, one financial firm showed significant weakness today. The stock of MF Global extended its precipitous decline, falling 16%, after Fitch downgraded the firm’s bonds to junk status. Everyone’s now wondering who will buy out the firm.
- Notable earnings announcements today included Proctor & Gamble and Exxon-Mobil. Both are in the Dow Jones Industrial Average. Both announced earnings in line with expectations and both were laggards today.
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