Daily Market Update – June 5, 2014 (Close)
The ECB announcement, which had been talked about for more than a week, came off as expected and the market appeared to be showing no interest, continuing to trade with a modest upside biaas the announcement was made.
For the most part, modest moves, whether higher of lower have characterized the pre-opening sessions lately, as well as the regular trading sessions, so it appeared as if the ECB had absoluely no impact.
Very little has had an impact on the market as a whole, although individual stocks have been beaten up more than usual lately and have been staying down longer than usual.
Since the ECB news was widely expected, it’s not too surprising that the morning seemed to be showing no impact. In what I can’t quite understand, the overnight deposit rate in the EU is now negative, while the lending rate is down to 0.15%.
The latter is even better than some of those no interest loans from your credit card company, especially since there’s no origination fee. You just have to belong to the EU.
You would think that such low rates would have an incredible stimulatory effect on the economy, but if you look at own own banking experience in the aftermath of the financial meltdowns in 2007 and 2008, that really hasn’t been the case. While our own markets went much higher after easy money became available to the banking system, it wasn’t because of any ensuing economic boom. It’s not too likely that the same kind of market growth will be seen in the European markets and there’s certainly no expectation that multi-national businesses will experience much benefit from increased spending.
So that leaves tomorrow’s Employment Situation Report as the final test for the week that saw another record close on the S&P 500 yesterday and shows no sign of giving up on the climb.
At least that’s what you would have thought, until 10:16 AM, when the market abruptly turned around from it’s morning low point, which had the DJIA down about 20 points and the S&P 500 down 5 points from yesterday’s close.
The conventional wisdom is that this market was once again moved by the casual thoughts of hedge fund manager David Tepper, who said he now had less to worry about, except that those words came almost two hours after the turnaround started. In fact, the S&P went up only another 2 points after his comments and the DJIA went up just another 9 points.
So you can be the judge.
We still do have tomorrow to deal with.
Lately the talk has started looking at the growth in employment from a cynical perspective, beginning to question whether the recent large numbers have been sufficient or at least meaningful.
While I don’t expect much to happen with tomorrow’s announcement, that kind of skepticism can get magnified in the event that the reported number comes in as a disappointment, particularly now that weather is out of the equation.
But none of that changes what has been the goal this week.
What has gotten in the way of achieving the goal have been the tepid moves seen. Ideally, the time to sell new calls is when there is a strong move higher in a stock, but those have been few and far between, as most have simply just showed up this week and are going through the motions.
TOday was a real contra-distinction to the past couple of weeks and it was nice to see any kind of conviction.
With next week’s weekly contracts appearing today a nice move higher was especially welcome in that it more broadly trickled down to the market’s components that have been essentially left out of the party. At least there was some opportunity to take advantage of that strength today and hopefully there will be some mopre tomorrow.
For now, it’s just sitting back and waiting for any sign or any signal.