Markets were spurred by reports that the world’s central banks might step in to save the economy.
First the scoreboard:
Dow: 13,157, +100.5, +0.7%
S&P 500: 1,411, +9.0, +0.6%
NASDAQ: 3,069, +16.3, +0.5%
And now the top stories:
- The big story of the day was supposed to be the meeting of Greek Prime minister Antonis Samaris and German Chancellor Angela Merkel. The question on everyone’s mind was whether Greece would be granted more time to meet its deficit targets while still getting access to bailout funds. However, the word from Merkel was that no decisions would be made before the Troika’s report (IMF, EU, ECB). This wait-and-see tone appeared to sap confidence from the markets. The euro and European stocks tumbled.
- The selling appeared to be exacerbated by an MNI report that Germany was looking into a temporary Greek exit from the euro. Officials did not confirm or deny the rumour. A traveller In Greece Sent Us These Depressing Pictures, And Explained Why The Economy Is A Wreck >
- However, minutes before the European markets closed at 11:30 AM, Reuters reported that the European Central bank was looking into “setting yield band targets under a new bond-buying programme.” This would effectively put a limit on how high funding costs could rise in the troubled eurozone countries. The euro bounced and European stocks turned positive after the headline crossed. Here Are The 10 Best Central Bankers In The World >
- A little after 11:00 AM, the Wall Street Journal’s Jon Hilsenrath published a letter from Federal Reserve Chairman Ben Bernanke to U.S. Representative Darrell Issa. Here’s the dovish statement that got everyone thinking more easy monetary policy is coming: “There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery.” READ: Fed Chairman Bernanke Answers 22 Questions From One Of His Biggest Critics >
- Many economists, like JP Morgan’s Michael Feroli, expect the Fed to introduce more monetary easing in September. Feroli believes that economic data hasn’t improved enough for the Fed not to embark on more easing.
- Bank of America’s Ethan Harris believes that the recent improvement in economic data isn’t a reason to get optimistic just yet. “The better US data probably reflects a combination of the usual random variation and weather distortions,” wrote Harris in a new note to clients. He thinks the U.S. economy is just “in the eye of the storm.”
- Dennis Gartman of the Gartman Letter announced today that he had dumped his entire stock position. “Yes we further understand that we may look foolish in the weeks ahead for standing down, but call it trader’s intuition or call it what you will, but we wish to move quietly to the sidelines,” he wrote.
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