Courtesy of John Nyaradi.
U.S. stock indexes power higher on comments from Europe and GDP report that could bring more Federal Reserve action.
The S&P 500 (NYSEARCA:SPY) jumped 1.9%, the Dow Jones Industrial Average (NYSEARCA:DIA) popped 187 points. 1.5% and the Russell 2000 (NYSEARCA:IWM) climbed 2.4% on expectations for more stimulus from the European Central Bank and the U.S. Federal Reserve.percent, to close unofficially at 2,958.09.
It has been a big couple of days in the Euro Zone as Mario Draghi, Angela Merkel and Francois Hollande all stepped up to say they would do whatever it takes to save the Eurodollar and the European Union.
Yesterday, ECB head Mario Draghi said he would do whatever it takes to save the Euro which was taken to mean another round of bond buying by the ECB to support Italy and Spain.
Today German Chancellor Angela Merkel and French President Francoise Hollande issued a joint communique stating that they, too, are going to do everything possible to save the Euro.
Markets reacted to the news with European indexes advancing and U.S. indexes following suit.
Offsetting the euphoria were reports that U.S. GDP slowed to 1.5% for 2Q, but beating estimates, University of Michigan consumer confidence coming in at the lowest level for 2012, and weak earnings for Facebook (NASDAQ:FB) and Starbucks (NASDAQ:SBUX) which set off short selling triggers on double digit declines.
ECB President Mario Draghi is going to meet with head of the German Bundesbank to open the door for ECB buying of Spanish and Italian bonds which the Bundesbank labels as “problematic” and illegal under current European treaty. A weak GDP number led many analysts to expect further quantitative easing from the Federal Reserve. The major U.S. indexes have now had three straight days of gains after a sharp sell off on Monday.
Bottom line: Poor fundamentals were overruled over the past three days as European policy makers made more promises and hope continued for more quantitative easing from the Federal Reserve. If the Federal Reserve and European Central Bank fail to follow through on their words with action, the sea could get choppy, indeed. However, if actions follow words, we could see another bull market advance.
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