Courtesy of John Nyaradi.
U.S. stock market rebounds on comforting words from the Federal Reserve and a better than expected jobs report.
The big news of the day was the Federal Reserve and Dr. Bernanke’s press conference which supported the idea that more stimulus would likely be forthcoming as the economy struggles to grow. Particular emphasis was placed on the real estate sector and the possibility of more Fed purchases of mortgage bonds which sent the financial sector (NYSEArca:IYF) to an impressive gain of 2.7%. Downside risk remains high and the Fed also cut its GDP growth forecasts, further greasing the rails for more easing ahead.
Getting some help from the ADP private employment report which indicated 110,000 private new jobs in October versus the expected 100,000, the materials sector (NYSEArca:IYM) vaulted +2.6% on the day while energy joined the party (NYSEArca:IYE) with a 2.8% gain on hopes for increased demand if a more severe economic slowdown can be averted.
With the prospects of further easing growing stronger, gold (NYSEArca:GLD) rose 1% while the U.S. Dollar declined a fraction.
Meanwhile, the news from Europe becomes more tense by the moment as the Greek referendum on the current bailout proposal will be held in early December, either the 4th or 5th, according to this afternoon’s announcement. Euro Zone leaders say there will be no further payments to Greece until the referendum passes and so it seems that if the referendum fails, Greece will head for a hard default which will likely have enormous consequences for not only Greece but European banks, the European zone economy and the U.S. economy and stock market, as well.
George Papandreou has taken an enormous all or nothing bet here and literally put the future of the Euro (NYSEArca:FXE) on the line with this unexpected and, some would say, reckless move.
But, for today, all was well as the Dow gained 1.5%, the S&P 500 added 1.6% and the Russell 2000 jumped 2.7%
Tomorrow brings the weekly employment reports, October ISM and September Factory Orders with more clues about the health of the economy.
Bottom line: An enormous struggle is underway between the central bankers and political leaders of the world and a slow global economy and seemingly unsustainable debt. The struggle has been magnified and made more dangerous by recent developments in Greece. If Greece goes, no one knows for sure how dangerous things could get but certainly a collapse of the Euro, bank runs, stock market declines and global recession are all distinct possibilities. Caution and nimble positioning of assets seem to be the watchwords of the day.
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