Thursday, April 22, 2010

Greek Deficit Widens, Worries Markets

The market is lower this morning amid renewed concerns about Greece's budget deficit. It's amazing how back and forth the market is over Greece. One day it's no big deal, and Greece will receive aid, and the next day the sky is falling and its woes are troublesome. Today, the concerns is that even though financial aid has been pledged to the country, its bond yields are widening on news that their budget deficit hit 13.6%, worse than the 12.9% expected.

While most stocks in the U.S. are lower, there are some standouts that reported solid earnings and their stocks are higher: Sandisk (SNDK), F5 (FFIV), and Starbucks (SBUX).

There was also a handful of companies that reported solid earnings, but not enough to keep their stocks up, and they are selling off: Pepsi (PEP), eBay, and Qualcomm (QCOM) to name a few.

In economic news, existing home sales were stronger-than-expected for March at 6.8%. Also, core PPI rose 0.1%, in-line with expectations.

The Greece news is weighing on the euro and pushing the dollar higher, which is again hurting commodities. Oil is down -1.5% near $82.40 while gold is down -1.1% near $1136.

Asian markets were lower overnight; the 10-year yield is flat at 3.73%; and the VIX is +5.88% higher to 17.26.

Trading comment: Patience is paying off today as the 2-day bounce in the markets looks to have run its course and we are seeing some pullback. I would peg near-term support in the market at the 20-day moving averages, which equate to 1189 for the S&P 500 and 2450 for the Nasdaq.

The President is going to speak about financial reform in a bit, and I can't see that helping the market. He will likely scold Wall St., imply that the fat-cat bankers got greedy, say we can never let this happen again, and propose some regulation that will likely prove to be overreaching and solving a problem that has passed, like slamming the barn door after the horses are already out. Such is the case with govt. regulation. It is what it is.

The other fact that rarely gets mentioned is that while the banks received aid from TARP, they have mostly paid it back and I don't think the govt. lost any money on the deal. Conversely, govt. sponsored Freddie and Fannie are expected to cost the govt. hundreds of billions of dollars at the taxpayers expense. Maybe govt. should point the finger at themselves and ask why the heck they were allowing Fannie and Freddie to condone such lax lending standards??

long FFIV

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