EmailPerusing last night's news, there was a brief moment where I thought corporate news might actually dictate the market's behavior today.
To wit, Yahoo! (YHOO) fired its CEO, Carol Bartz, and Bank of America (BAC) "streamlined" a few of its executives out the door in a management shakeup, namely Joe Price, former President of Global Consumer and Small Business Banking, and Sallie Krawcheck, former President of Global Wealth and Investment Management. Taking their place will be David Darnell and Tom Montag.
Both stocks are indicated higher in pre-market action and the S&P futures are 1.4% above fair value.
The action in these respective stocks is helping to support the market's positive disposition, but it is not dictating the market's behavior. That function belongs to Germany's Constitutional Court, which rejected a lawsuit to block Germany's participation in EU bailouts.
While the court ruling was expected, it nonetheless produced a relief bid for two reasons: (1) the court didn't invite more chaos into the mix of Europe's sovereign debt dealings and (2) the market understands that it can't take anything for granted when it comes to official judgments on the process for handling Europe's debt problems. In other words, the ruling may have been expected, but it was not guaranteed.
European bourses have responded favorably to the news as most of the major averages are up about 2.0%. Asian markets also rallied Wednesday, gaining between 2.0% and 3.0% following Australia's better-than-expected Q2 GDP report and a bargain-hunting effort in the wake of recent losses.
The bargain-hunting mentality is perhaps kicking in today for the U.S. market, which has seen the S&P 500 drop 4.4% in the first three trading sessions in September and the yield on the 10-year note fall as low as 1.90%.
The yield on the 10-year is back above 2.00% today (2.02%) as the risk trade is back on for the time being. On a related note, gold futures are down 2.1% at $1833.50 per troy ounce.
In due course, we should hear talk of short covering augmenting today's gains as weak-handed bears lose some nerve in the face of the S&P 500 managing to hold support yesterday at the 1140 mark and in the face of the snapback expected at the open on the German court ruling.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
