Market Talk

US stocks are spring-loaded for an early burst higher, goaded by big M&A news (AT&T’s $39B deal for T-Mobile), reports that Japan is gaining control over its nuclear plant crisis and rallying markets in Europe.

Chatty week for the Fed, with a host of speeches scheduled for the central bankers, while the data calendar is relatively thin. February existing home sales set for 10:00 a.m. ET, and new home sales due Wednesday. Other data include February durable goods on Thursday and a third look at 4Q GDP Friday.

Oil running higher, nearing $103/barrel. S&P futures up 14.80, Dow futures up 111. Ten-year note slides, yield at 3.33%.

There were two things I saw last week that put the fear of God in me. Both came Wednesday. One seems to be improving; the other remains a wild card, and that’s why I bring it up.

That was the first time I saw close-up pictures of the mangled Fukushima Daiichi nuclear plant. The walls that contain two of the reactors are completely gone. The upper third is missing from another. Seeing those pictures, it was pretty obvious to me that a total meltdown was a very real possibility. Those pictures were worth more than 1,000 words, and every word was absolutely shocking.

The Fukushima 50 have had some success in stabilizing the plant as of Sunday, and I fervently pray they are ultimately successful. God bless their courage. Were that others were so dedicated.

The second thing caught my attention Wednesday was the yen’s frenzied spike just after 5 p.m. New York time. The yen, which had been strengthening since last Friday’s earthquake, suddenly broke through all resistance and spiked higher. Lightning fast. Straight up. It was a black-swan kind of thing. Shorts were forced to sell, and that only contributed to the rise. It was chaotic.

“I can almost guarantee you that a few (hedge) funds out there were hurt very, very badly,” Dennis Gartman, who edits and publishes The Gartman Letter, said via email.  “No one ever escapes that sort of action entirely.”

I’ve had the feeling since last Friday that the ramifications of Japan’s nightmare are going to be larger than people initially suspected, and they are going to end up in places where people don’t expect, and in a world as tightly connected as the one in which we live, that increases the odds that one haywire event will have a cascading and destructive effect. Something like the yen’s sudden jerk has the potential to spark a global unwinding. It’s a scary thing to contemplate.

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The images that mollified the markets here in the states today were fuzzy ones of helicopters dumping water on the destroyed nuclear reactors at Fukushima Daiichi, and the statements that mollified the markets were vague assurances of progress in fighting that catastrophe.

There’s also been a general feeling that the area stricken by the triple calamities isn’t economically vital, and the market’s been banking on the idea that the nation’s output won’t be too badly crimped. So long as Tokyo’s okay things will be okay seems to be the general idea.

But the disruption to daily life in Tokyo is growing, and if daily life there is being upended, then the economic effects of the calamity can only grow. I was here on Sept. 11. Nobody fled New York City, even though many wanted to. Everybody worked through a nightmare. I have no doubt that the Japanese people will as well, but this idea that it’s a “well contained” calamity, to borrow a phrase, is starting to look just a bit silly.

Obviosuly the situation in Tokyo is nowhere near as dire as that in the north, but the capital is becoming a very chaotic place itself, as the FT’s Gwen Robinson makes clear in this post that provides a look at the mood inside one of the world’s largest cities, and one of the world’s three major financial centers :

The television showed images of enormous queues at international airports around Japan. Some people, unable to make reservations by phone, went to Narita or Haneda airports near Tokyo to try to buy tickets over the counter.

Train stations were also packed with people trying to head west, particularly expatriate families seeking to relocate to cities such as Osaka, Kyoto and Fukuoka near international airports.

In fact, one expat wife who was taking her children to Kyoto earlier in the week described the bullet train, normally half full with besuited Japanese businessmen and a smattering of other travellers, as a “rolling high-speed nursery,” packed with screaming kids and foreigners all fleeing Tokyo.

As if to illustrate our post this morning, and to illustrate just how jittery the market is, and to painfully illustrate just how dangerous the situation in Japan is still, the news late this morning out of Europe, regarding the nuclear crisis in Japan, drove every asset into an immediate nosedive (or in the case of the safe havens, a sharp spike higher.)

The latest news roiling the markets is about Japan, but it isn’t actually coming from Japan. Rather, the EU’s commissioner for energy, Guenther Oettinger, told a European Parliament committee “the site is effectively out of control.” This reiterated the same comments reported in two UK papers, the Telegraph and Daily Mail.

Look at the pictures in the Mail’s story; I have a more comprehensive grasp of just how bad the damage is after seeing them. They are sobering. There have been reports that those 50 people who’ve been — heroically — trying to save the plant had to be evacuated temporarily, and you wonder how long they can stay there.

The Dow dropped as much as 190 points in a matter of minutes. It bounced back to about down just 100, and is currently down around 170. All this underscores the fact that the market is a rough place to be right now, especially if you’ve been hooked by the Street’s usual sunny pronouncements.

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