Friends,
It was a tremendous day in the markets for the bulls as stocks enjoyed a powerful rally after the results of the European Union meetings last night. The Dow Jones Industrial Average was up 339 points to close at 12,208. The S&P 500 was up a whopping 42 points to finish the day at 1284. We will be watching to see if the S&P can stay above the 1257 level which was resistance and now becomes support. Gold was up $19 to finish near $1743, and oil was up $3.60 (yikes) and finished the day near the $93.84 level.
The main news, of course, was the series of steps that came out of the EU meetings. First, there will be a voluntary haircut of 50% on Greek debt (which will not trigger default), second the EFSF will be leveraged to increase its lending capacity to as much as $1.5 trillion euros, third European banks will be raising over $100 billion euros in new capital, and last the IMF will lend Greece another $100 billion euros. Is this just kicking the can down the road? Probably, but it is a start and the naysayers were caught expecting the worse and thus short the market. The result was a booming rally.
It didn’t hurt that the initial look at 3rd quarter GDP was not as bad as we might have thought a few months ago, when many believed we had entered another leg of recession. Today’s GDP number was up 2.5% for the 3rd quarter and added to many of the other numbers we have seen recently, seems to confirm that we are not in a recession, at least at this moment. With the hope that we received in Europe today, and the recent indications out of China that they are not slowing as bad as many thought, it seems that the bears may have to rethink their global recession thesis. As always, it’s too early and too foolish for the bulls to be declaring victory, but it’s sure fun to see the bears scrambling after all the fun they had in the 3rd quarter.
We have two more trading days left in October, but at the moment it looks like this specific October is going to end up being one for the record books. We’ll have the final numbers for you on Monday, but in the meantime we’ll enjoy the rally and see if the bulls can run into yearend.
Have a nice evening everyone.
