Friends,
This morning ECB President Mario Draghi went from being Santa Claus to being the Grinch that stole our Holiday rally. After the expected rate cut was announced, along with news that the ECB would ease collateral criteria for loans and allow up to 3 year loans to be backed by the ECB, early futures indicated that the Dow would open up with a 100 plus point gain. Then in a Q&A session the Grinch, I mean Mr. Draghi, made it known that markets were misreading his intent to buy more sovereign debt and that the ECB had no intention to do so. Ooops! He wasn’t even sure that the Eurozone would stick together (of course he doesn’t know, but you’re supposed to say “sure the Eurozone is fine”. Doesn’t he have the playbook?). Anyway, futures nosedived and when markets opened stocks immediately dropped, as the Dow fell a quick 200 points. We tried to rally late in the day when notes of the EU summit began being leaked, indicating that they are pushing for a stronger fiscal union. Stocks rallied about 100 points, but once again, the last rumor wins, and when all this was denied (the Germans evidently are not on board), down we went again.
By the close, the Dow Jones Industrial Average was down 198 points to close at 11,997. The S&P 500 was down 26 to close at 1234. Gold was down more than $34 to finish near $1710 per ounce, and oil also fell, losing $2.73 to close near $97.75 per barrel WTI. It was disappointing to see the Dow fall back under 12,000 and the S&P 500 fail once again to get through the 200 day moving average, but as we know, this market is totally headline driven right now. Santa is going to need some good headlines if he is going to be able to deliver the goods.
These markets will make your head spin, but in the meantime on the domestic front, the weekly jobless claims number fell nicely. Oh well, we are being held captive to European headlines and we will just have to deal with it for the time being. We’ll continue to look for opportunities that arise from the dislocation and keep you informed as to what is going on. The ball is in the European’s court. It’s up to them now.
Have a good evening everyone.
