Bears Suffer A Devastating Loss: Here's What You Need To Know

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Two in a row! The big losses from November are just about gone, devastating the bulls.But first, the scoreboard:

Dow: +107
NASDAQ: +28
S&P 500: +15

And now, the top stories:

  • After yesterday’s rally, the good vibes carried forward through the night in a fairly predictable, but unremarkable fashion. The Nikkei had a huge night, and the rest of Asia less so.
  • Europe also continued to rally modestly. Yields on PIIGS debt continued to come in, while everyone awaited the ECB announcement, and word on whether Jean-Claude Trichet would drop the nuclear option or not.
  • At 7:45 we got a one sentence policy announcement from the ECB. There would be no change in the interest rate. No Shock there.
  • But then at 8:30 AM, all hell broke loose when Trichet took to the podium and discussed policy. Almost immediately it became clear that there wasn’t going to be a new bazooka unveiled. The sense everyone got was that was that Trichet was sticking it to European governments, telling them to solve their own problems themselves on the fiscal front. The euro plunged! The pre-market gains faded away! It looked like yesterday’s gains could be erased.
  • But then there was another shift. Exactly while Trichet was talking, the ECB was in the market aggressively buying PIIGS debt, sending yields lower. The euro soared! Plus, as people parsed Trichet’s comments some more, one thing became clear: Just because there’s no bazooka it doesn’t mean he will stop his extraordinary activities. Click here for a full explanation of how things worked out brilliant for Trichet >
  • It was risk on heading into the open (Oh: At 8:30 we got kind of a meh initial claims report, but nobody seemed to care too much).
  • Then at 10:00 bulls got a surprise gift from October pending home sales that were way better than expectations, and represented one of the first genuinely good housing numbers that we’ve seen in ages. From their it was a rocket-ride higher across all the “risk on” assets.
  • We’ve now almost totally erased the November selling, and are back near 26-month highs. And beyond that, the dollar is stronger than the last time we were here, so this isn’t just about a weak buck.
  • There were a few other things that contributed to the heavy buying. First of alll, November retail data came in extremely strong. Gap and Target seem to be among the huge winners. Also, the market is still reacting (maybe) to Goldman’s big upgrade of the US economy.
  • All eyes on the jobs report tomorrow! See here for a preview >

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