Courtesy of John Nyaradi.
Today was the scene of another “hope” rally as U.S. stock indexes shook off yesterday’s losses, even as the situation in Europe continued to deteriorate.
Major markets climbed today on the hope that global central bankers were planning to step in yet again and save the day as the world faces headwinds from Europe, a slowing global economy and the uncertainty of Sunday’s Greek elections.
For the day, the Dow Jones Industrial Average (NYSEARCA:DIA) added 1.3%, the S&P 500 (NYSEARCA:SPY) bounced 1.2% and the Nasdaq (NYSEARCA:QQQ) added 1.2%.
Oil also advanced with United States Oil Fund (NYSEARCA:USO) gaining 2.3% as oil settled at $83.40/bbl.
Gold (NYSEARCA:GLD) gained 0.7% as the yellow metal settled at $1610.40/oz.
Today’s gain came even as Spain’s and Italy’s borrowing costs soared over ongoing concern regarding the future solvency of those countries and the future of the European Union. Spanish 10 year bond yields hit record highs and Italy’s climbed with Spain’s at approximately 6.7% and Italy’s at 6.1%, both perilously close to the unsustainable 7% level.
Spanish banks remain a problem as Fitch downgraded 18 and global investors wonder where the money is going to come from to bailout the Spanish banks. The European Stability Maintenance (ESM) doesn’t exist yet and since Spain is a big contributor to the European Financial Stability Facility (EFSF) will Spain be borrowing from itself to pay itself?
But for today it was all about Chicago Federal Reserve President Charles Evans who said he likes accommodation and easy monetary policy to support jobs and economic growth. A confirmed Fed dove, Mr. Evans, unfortunately for hope traders/investors, is not a voting member of the Federal Open Market Committee.
On a technical basis, markets remain in the same situation as they have for the last several days, seesawing back and forth between support and resistance.
Bottom line: Once again, stock markets jumped on hope for more Federal Reserve intervention to offset recent market declines.
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