Friends,
It seems that once market participants had some time to think about the “deal” that was announced last Friday in Europe, they decided that there is quite a lot of work left to do. The reality is that at least we are dealing with a continued slowdown in Europe for some time to come, and at worst we still have risk of something more dramatic. The markets wanted a commitment to some type of quantitative easing from the ECB and, for the time being, it just does not look like that is going to happen. Stocks fell right from the start today and never really mustered much of an attempt to rally. By the close, the Dow Jones Industrial Average was down 162 points to finish at 12,021. The S&P 500 was down 18 points to close at 1236. Gold was pummeled, with the precious metal finishing the day down $47 to close at $1669. Oil completed the “risk off” theme as it was down $1.27 per barrel to finish near the $98 level WTI.
On a technical basis we fell back below 12,000 in the Dow for most of the day but fought back in the last half hour to close just above it. The S&P 500 needs to hold the 1227 area, and that was accomplished also. So here we sit, somewhat stuck in the middle of nowhere, as stocks are just about unchanged for the year. Traders do not seem to have much of an appetite to add a lot of risk before the end of the year, and volume continues to be painfully light (we’ll discuss this further in our 1st quarter outlook for 2012). At this point, there does not seem to be much of a reason to expect Santa to deliver a rally before year end, but remember, the market seems to have a very short memory, and any headline can change things quickly.
I still think that the “Lehman” event was taken off the table in Europe for now, but there is still the likelihood that the problems exist for years to come. The key will be, when will market participants move on and focus on things other than Europe. If that can begin to happen in 2012, then there may be a good chance for some positive things to happen in the market. On the domestic front, we have a Fed meeting tomorrow (nothing should happen) and inflation reports later in the week. We’ll keep you informed as to what transpires.
Have a nice evening everyone.
