Rain, nor sleet, nor snow, nor a run on all of Europe could hurt the bulls today.But first, the scoreboard:
S&P 500: -1.35
- The day began in the early afternoon US time on Sunday, when the EU/Ireland/ECB/IMF announced a bailout deal for Ireland had been reached. The bailout would total about 85 billion EUR, with about 17 billion EUR coming from the country’s own pension system, with the whole thing carrying an average interest rate of just below 6%. The details were welcome, and the interest rate could have been worse, but this was not shock & awe. Virtually nobody expected the news to put an end to the crisis in the eurozone.
- And it didn’t! The euro staged the shortest sucker’s rally of all time, before quickly reversing course in late Sunday trading, falling below Friday’s close, and hitting the lows of last week. The euro tried making an overnight rally, but then got crushed again in the early hours of Monday.
- It was bloody all around. Spanish, Italian, Portuguese, and eventually Irish yields all went back towards record highs on the day. The euro continued to get punished. Equities sold off hard. Decent gains overnight in Asia were not enough to provide a lift to US equities, which were zooming towards a lower open. Click here for a guide to the next sovereign crisis >
- There really wasn’t much news in the US to do anything to counteract the negative trend coming out of Europe. At one point the major indices were off over 1.3% across the board.
- After the open we did get a blisteringly good Dallas Manufacturing Index report, which th market seemed eager to ignore.
- But then Europe closed, and just as it was back during the crisis in May, the euro close brought some stability. And in the early afternoon in the US, markets started to grind higher and higher and higher, until we ended up where we were. If there’s one thing to watch it’s the fact, which we pointed out multiple times today, that the markets are taking their cues from the aussie dollar, and now the euro. What matters is what’s happening in Asia. Of course, if all of Europe really does go splat, it’s inconceivable to imagine the US avoiding the fallout in any significant way.