Photo: AP Photo/Jin Lee
Remember economics?You shouldn’t.
As BTIG’s Dan Greenhaus pointed out in his nightly note last night, the market has totally moved past that, moving purely on the basisis of the decisions of political leaders.
To repeat a story we have been telling for some time now, and repeated last night, market participants serve at the pleasure of policy makers. While some might argue otherwise, today was yet another example in our opinion. For starters, it went completely unnoticed by traders that consumer confidence, which plunged in August, rebounded only modestly as an important category of the report, the “labour differential,” worsened for the fifth consecutive month. Nonetheless, early market gains — the S&P 500 was up by nearly 3% while the Russell was up by nearly 4.4% – were generated in part by European headlines but so was the late day swoon. The Financial Times reported in an article titled Split Opens Over Greek Bailout Terms that as many as seven Euro area countries were looking for larger private sector involvement (PSI) in the second Greek bailout.
You can read the story for yourself but one thing is certain; the financials went from being among the market leaders to, ignoring a last minute rally, the worst performer on the day. BAC and JPM closed down, the credit card companies — AXP, DFS and COF — each closed in the red as well and the regional banks virtually all closed down on the day. The Morgan Stanley cyclical index closed nearly 2.5% off its highs as the energy and material names gave back a ton of their gains. Easy come, easy go.
Obviously, on some level the economics matter, especially in the sense that a recession/depression would exacerbate the acute financial/policy decisions being undertaken right now.
But yes, it’s all politics, and therefore all rumours for now.
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