Stocks React Positively To EU Summit Announcement
There weren't a ton of details provided about the new agreements that came out of the EU summit, but after yesterday's sharp selloff the news was enough to spur buyers back into the market.
The members agreed to tighter fiscal controls, with penalties for member nations that exceed budget deficits of more than 3% of GDP. They also stepped up the time table with which the ESM should enter the picture. But it looked to me like the dollar amounts they are talking about are still not enough to really ringfence the problems. Also, Britain decided not to sign and join into the agreement as they don't want to cede any fiscal sovereignty.
Asian markets were lower overnight, despite a CPI figure out of China that looked better than expected. Europe's markets are higher this morning, and the euro is getting a slight boost as well.
Commodities are mostly higher, except for oil prices which have been slight lower near $98.20 this morning. Gold prices are up to $1716, and copper and silver prices are higher as well.
In corporate news, both Texas Instruments (TXN) and DuPont (DD) lowered their forecasts. Those stocks are getting hit, but are not weighing on the rest of the market for the most part.
The 10-year yield is trying to get back above the 2.00% level after falling below it in yesterday's trading. And the VIX is down 7% so far down to 28.40 after spiking back above the 30 level yesterday.
Trading comment: We still have a long way to go into today's session, but so far buyers have already stepped up to the plate. I have said I thought we were in the timeframe of the year where most investors would be in buy-the-dip mode. And since yesterday was a pretty big dip by most measures, it is not surprising to see buyers come into the market. The SPX continues to consolidate underneath its 200-day average. I still believe it will make a successful breakout before year-end. But I also realized the credit gauges have not improved, and the chances for another correction in Q112 remain high.
Jordan Kahn and/or KAM clients are: long GLD, SCO, SLV, and SH