I tell you, the market’s in one of those states, like late spring when you don’t know whether to turn on the air conditioner or crank up the heat. Sometimes you do both in the same day.
When the market seizes on a European industrial production report, about April, before the selloff started, and which compares IP to last year, which was awful, you know the bulls have control here. But control these days is a fleeting thing. The Dow was up 118 this morning, and down 13 this afternoon.
Maybe that’s because there are still some ill winds blowing in Europe that at other times would send traders for the exits. But they’ve got some things in their sights, like the 200-day moving average on the S&P 500 (which lives around 1112), it was a bad May, and they’re just in no mood to give it up. Traders drove the S&P 500 as high as 1105.96 today, but weren’t able to punch it any higher. We’ll see what the last hour brings.
Meanwhile, here are some developments to keep an eye on, that don’t have anything to do with British goalkeepers:
- Even as Angela Merkel is promising greater cooperation with France in setting policy on the Continent, her center-right coalition is in danger of falling apart, the Guardian reports. Merkel and France’s Nicolas Sarkozy said they’ll present a “united front” at the G20 meeting in Toronto on June 26-27, but Merkel’s coalition may fall apart after the June 30 election of a new president, which could push her to change coalition partners, or force a new election. Hard to see how lasting anything coming out of the G20 could be if Merkel’s government falls apart.
- Belgium’s government is on the verge of falling apart after a landslide victory by a separatist party, the New Flemish Alliance. This would be like, I don’t know, the tea party winning half of the U.S. Congress and threatening to secede (starting in, oh, I don’t know, South Carolina or something.) Now, sure, Belgium is small. So is Greece. So was the subprime market.
- Spain. There’s enough smoke around Spain to choke a horse, but the markets for some reason absolutely do not care. For one thing, the widening deficit and high unemployment rate are creating a “financing freeze” for most Spanish banks and companies, the chairman of BBVA, Francisco Gonzalez said today. BBVA is the country’s second-largest bank by assets. Can you imagine the reaction if JPMorgan’s Jamie Dimon said U.S. companies and banks were seeing a financing freeze?
Then there are the spreading reports that Spain will apply for a bailout this week. They’ve been quickly rebutted, of course. Remember, though, that the Greeks did the same thing, right up until they applied for a bailout. The Spainish whispers come on top of a report from the BIS that French and German banks are sitting on nearly a trillion dollars worth of Spanish, Greek, Portuguese and Irish debt, about 60% of the eurozone total of nearly $1.6 trillion.
- Oh, and I didn’t even mention Moody’s downgrade of Greek debt to junk.
But who cares about all that, right? You know what the biggest gainer in the S&P 500 is today? AIG, up more than 7%. (When that piece of news hit my desk, I had to doublecheck to make sure AIG even was still in the S&P 500. To my mild surprise, it is.)
When a ward of state like AIG is one of the biggest gainers on the day, that should tell you everything you need to know about the state of the market.
Party on, Wayne.