Courtesy of John Nyaradi.
With more positive U.S. data points and seasonal strength, Europe holds the key to the stock market’s future.
Today’s economic data points were mixed with weekly unemployment ticking back up above 400,000, however, car sales climbed to levels not seen in nearly two years, manufacturing sharply improved and construction spending rose.
Europe settled down a bit as positive bond auctions in Spain and Italy’s debt dropping below the critical 7% level calmed frayed nerves on the Continent. Apparently yesterday’s dramatic central bank intervention around the globe bought European leaders some more time to find their way out of the ongoing financial crisis they face.
However major European indexes (NYSEARCA:EFA) (NYSEARCA:IEV) and the U.S. Financial Index (NYSEARCA:IYF) both declined as it will take more than or two good days to restore confidence in the region, and 30+ global banks were hit yesterday with a downgrade from S&P.
At home major markets were flat with the S&P 500 (NYSEARCA:SPY) slipping -0.2% while the NASDAQ (NYSEARCA:QQQ) gained +0.2%. The sideways action came as a rest day after yesterday’s huge rally and in anticipation of the monthly Non Farm Payroll and Unemployment report.
Tommorow’s widely watched Non Farm Payrolls report is scheduled with forecasts of 125,000 new jobs added. A beat here, coupled with December being a seasonally strong month for stocks, would give strength to the bull case and help to overcome strong overhead resistance at the 200 day moving average for the S&P 500 (NYSEARCA:SPY) that lies just ahead. However, Europe and the containment of its crisis hold the key to the future of global risk assets as we head for the end of the year.
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