Europe even starting to wear on market's bulls
Months of positive signs in US can't rally stocks as continent's debt troubles persist
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By Edward Krudy
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NEW YORK — Wall Street is stuck in a highly volatile range as investors hoping for a rally into the end of the year are browbeaten by Europe's unfolding crisis.
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The political intrigue in southern Europe has flummoxed investors stateside. Papademos has replaced Papandreou. Berlusconi is, well, Berlusconi. The headlines and the subsequent volatility seem relentless.
"It literally just changes consistently each and every night," said Jeremy Zirin, chief U.S. equity strategist at UBS Wealth Management in New York.
"Earlier this week, there were worries about a potential Italian default and now we've seen government and regime change in two of the periphery nations."
Again, events in Europe over the weekend could end up shaping the start of the trading week in U.S. markets.
Italy's Senate approved a new budget law, clearing the way for approval of the package in the lower house on Saturday and the formation of an emergency government to replace that of Prime Minister Silvio Berlusconi.
In Athens, former European Central Bank policy-maker Lucas Papademos was sworn in as Greek prime minister, replacing predecessor George Papandreou after days of political wrangling. He is tasked with meeting the terms of a bailout plan to avert bankruptcy.
The net result was that the S&P 500 ended up almost 1 percent on the week after a drop of nearly 4 percent on Wednesday.
That midweek plunge came after Italy's bond yields blew out to over 7 percent, raising fears that the country, which is also the world's third-largest bond market, could go bankrupt.
But with worries that the crisis could spread to other countries, investors are looking for either the European Central Bank or EU governments to commit more capital in order to backstop sovereign bond markets.
"For the markets to continue to rally, we would need to see market confidence that Italian, Spanish and French bonds are money good," Zirin said. "There is likely to be more volatility around the sovereign debt crisis until we get more capital committed to the solution."
Story: Ripples from Europe starting to hit US shores Many investors picked up put options heading into the weekend to hedge against a potential downdraft in equities next week.
Options traders exchanged about 1.48 million contracts on the Financial Select Sector SPDR fund — 3.6 times the average daily volume — as puts outpaced calls by a factor of more than 13 to 1, according to Trade Alert.
Technical factors are taking on greater significance as the S&P 500 hovers at the top end of its trading range and traders watch for a break either up or down. When that happens, it could be swift if recent volatility is anything to go by.
Ari Wald, a technical analyst at Brown Brothers Harriman in New York, said evidence is building for a move to the downside after the index failed for a second time since late October to push above its 200-day moving average at around 1,272.
"If we keep failing at this, it looks like it's confirming another lower high from the May peak," he said. "This still looks like a downtrend to me."
The 200-day moving average, a closely followed level, has emerged as a key battleground for investors this year, with successive tests to the downside over the summer eventually leading to a 13 percent cascade during five fraught trading days in August.
On the downside, Wald sees support at the 50-day moving average at around 1,200. A breach of that could take the index back to around 1,100 in early 2012, he said.
But market technicians also say positive seasonalities could be in stocks' favor.
November marks the start of the "six best months of the year" when the Dow has booked an average gain of 7.5 percent since 1950, compared with just 0.4 percent in the other half of the year, according to the Stock Trader's Almanac.
One reason cited for that seasonal lift, at least during the last few months of the year, is holiday spending.
Investors will look for more improvement in retail sales when data for October is released on Tuesday, especially after the Thomson Reuters/University of Michigan report on Friday showed consumer sentiment rose to a five-month high in November.
During the last major week of earnings season, some prominent retailers are set to report results and give an outlook through the end of the year. They include Wal-Mart Stores, often seen as a barometer of U.S. consumer spending, and a niche retailer such as Abercrombie & Fitch.
"My guess is we are going to have a reasonably good consumer in the year-end," said Philip Dow, director of equity strategy at RBC Wealth Management in Minneapolis. "My target on the S&P is 1,380. I still think it could happen."
Copyright 2011 Thomson Reuters. Click for restrictions.
Discuss: Europe even starting to wear on market's bulls
Months of positive signs in US can't rally stocks as continent's debt troubles persist
If you have no consumers, you have no need to produce anything, if you have no need to produce anything, you have no need to expand and hire, if you do not expand and hire, you HAVE NO CONSUMERS. The stock market is a casino where the rich bet their money hoping for a jackpot and where the idiots with a few dollars left desperately "invest" hoping to hit the one in a million and become one of the rich. In the end, the house ALWAYS WINS. Production is the key to growth, without production there can be no growth. Government creates nothing but debt, expanding government will temporarily produce consumers but, as we have already seen, the taxpayer well soon runs dry. Were it not for the fact that the US can just keep printing money until they run out of paper and ink, we would have already defaulted. One day soon the inkwell will run dry as well. The 1% will be fine for awhile and the 99% will live in crushing poverty. At one point, after they have starved enough, they will rise up as they have in the Middle East. The inequality of the economic situation in this country will not continue forever. It will, unfortunately, take take a second American Revolution to right this country. Our leaders, crooks, thieves, and liars to the last man and woman, BOTH SIDES OF THE AISLE, because of their incompetence, greed, and outright dishonesty, lack the ability to repair the system. This is a long, long way from over kiddies.
Data: Latest rates in the US
| Mortgage rates | View rates in your area | ||
|---|---|---|---|
| Mortgage type | Today | +/- | Chart |
| 30 yr fixed mtg | 4.09% | ||
| 15 yr fixed mtg | 3.40% | ||
| 30 yr fixed jumbo mtg | 4.74% | ||
| Auto rates | View rates in your area | ||
|---|---|---|---|
| Auto type | Today | +/- | Chart |
| 48 month new car loan | 4.19% | ||
| 36 month used car loan | 4.54% | ||
| 36 month new car loan | 4.13% | ||
| Home equity rates | View rates in your area | ||
|---|---|---|---|
| Home equity type | Today | +/- | Chart |
| $30K HELOC FICO | 4.75% | ||
| $30K home equity loan FICO | 6.02% | ||
| $75K home equity loan FICO | 5.70% | ||
| Credit card rates | View more rates | ||
|---|---|---|---|
| Card type | Today | +/- | Last Week |
| Low Interest Cards | 10.82% | 10.82% | |
| Cash Back Cards | 16.43% | 16.43% | |
| Rewards Cards | 15.43% | 15.43% | |
| Savings rates | View rates in your area | ||
|---|---|---|---|
| Savings type | Today | +/- | Chart |
| Money market account | 0.53% | ||
| $10K Money market account | 0.62% | ||
| 6 month CD | 0.47% | ||
Source: Bankrate.com
Come boys roll the dice. You can only be wrong 50% of the time.
Or roll up your sleaves and get a real job and manufacture or produce something.
Not just shoveling money around ”