|Dow||+211.86 to 17,884.88|
|S&P 500||+21.01 to 2062.52|
|Nasdaq||+47.67 to 4764.37|
|10-YR Yield||+.018 to 1.815%|
|Gold||+$2.40 to $1,266.90
|Crude Oil||+$2.33 to $50.78|
Market volatility reigns supreme – that’s what the last two days make clear, if nothing else.
Yesterday, everything looked great in the stock market right up until 3:30 p.m. Then in the span of a few minutes, a 100-plus-point rally in the Dow went up in smoke.
The catalyst? The European Central Bank cut Greece off from one of two emergency credit lines. Specifically, the ECB said Greek banks couldn’t keep using Greek government bonds as collateral for cash borrowings from the pan-Europe central bank.
The ECB maintained a separate Emergency Liquidity Assistance line open. But borrowing money there costs a lot more, and the risk of loss falls on Greece’s own national central bank rather than the ECB.
The unspoken reason for the ECB’s action was abundantly clear: “Greece, stop this claptrap about reneging on your debts and reversing austerity measures — or the aid that’s keeping you from going broke will dry up!”
Greece got even blunter treatment today in Germany, according to press reports. Finance Minister Wolfgang Schauble told Greek minister Yanis Varoufakis that Greece had to stick to creditor demands tied to its 240 billion euro bailout … or else!
|Germany’s finance minister Schauble said Greece better stick to creditor demands.|
It’s amazing that traders and investors here in the U.S. still … STILL … have to keep a wary eye toward Europe. But the simple fact is, our markets are joined at the hip. Currency, bond, and stock movements tied to the European debt crisis invariably cause ripples here.
The good news?
It seems like those ripples aren’t turning into tidal waves. Stocks surged today … less than 24 hours after they tanked … despite a lack of fresh good news out of Europe. If I had to put a finger on “why,” I think it’s because investors are assuming the ECB’s game of hardball will force the Greeks to get back in line.
But that may not be the best bet. And I seriously doubt we’ve seen the last of Europe-driven volatility. Over the next several weeks, Greece will have to figure out a way to pay back, or roll over, billions of euros worth of debts that are coming due. If the Germans play hardball, the late-day sell-off on Wednesday could turn out to be just an appetizer of what’s to come.
|“Keep a wary eye on the news from the other side of the Atlantic as we head later into February.”|
My recommendation is to make sure you consider taking some profits off the table when you get ripples like today … while using unjustified, “collateral damage” driven selloffs in sectors like energy yesterday to add some exposure on the cheap. Then keep a wary eye on the news from the other side of the Atlantic as we head later into February — because that’s when Greece’s debt problems will get more acute.
So what do you think? Are you following this Greek tragedy closely, and worried about what it means for your investments? Or could you care less about anything Greek beyond which flavor of yogurt to buy?
What do you think happens to the euro? Will it take a last-minute deal to save the currency and drive it higher? Or will it — rather ironically — actually soar if Greece gets kicked out because the countries that still back the currency are stronger? Hit up the Money and Markets website and share your thoughts on this important topic!
|Our Readers Speak|
In the wake of yesterday’s twin transportation disasters, you had a lot of ideas on what — if anything — can really be done to reduce the risk of tragic accidents in the air and on the rails.
Reader Bill S. said avoiding those carriers who have suffered recent crashes makes a ton of sense: “Here’s an idea that might work … don’t even think about getting on an airline operated by an Asian carrier! You also forgot to mention the crash in San Francisco by another Asian carrier where the pilots misjudged their speed and crashed into the retaining wall at the landing strip. There appears to be MAJOR problems with the Asian carriers and their industry infrastructure.”
Reader Chilcowas pointed out that airline expenses have tanked along with fuel prices, and said that money should be put to good use. The comments:
“Hopefully, with lower fuel costs, airlines will no longer throw caution to the wind by flying the most direct route regardless of the risks involved — e.g. flying over a war zone or in the direct path of a severe storm. The costs involved in these disasters far outweigh the time and fuel saved.”
On the other hand, Reader H.C.B. said that there’s no way you can completely eliminate risk — in transportation or in life. His somewhat philosophical view:
“Life is fraught with risk. Welcome to reality ladies and gentlemen. No activity is completely risk free and never was. Eventually the odds do catch up with you (100 percent of the time).
“So, whether it’s marriage, flying, or investing, it’s all the same in the end: ‘You pays your money and takes your chances.’ Pursue happiness, live life. Don’t worry too much. What will be will be.”
And in that vein, I thought I would end with some comments from Reader Walcott H. He identified himself as a retired U.S. airline pilot and offered this perspective:
“I can tell you that aviating is an inherently incredibly dangerous activity and it takes a huge amount of money, effort and experience to bring that risk down to acceptable levels. I’m glad every accident makes big news as I think that’s what it takes to keep the effort going.
“For your entertainment, the next time you fly, look out the window at cruise and know that just on the outside, the wind is blowing by much harder than the worst tornado. It’s so cold you’d freeze in seconds, and it’s way too thin to breathe.
“On landing, think two or three loaded concrete trucks tied together arriving at race car speed and coming to a stop on the runway. I’ve never thought it all less than awesome but we manage it and manage it well.”
Great insights Walcott! It truly is amazing that we’ve managed to reduce the risk of flying (or hurtling along on the train tracks at 50-100 mph!) as much as we have over time. Here’s hoping that ongoing technological innovation, reasonable levels of private investment, and proper government oversight continue to reduce the loss of life.
Do you have any other thoughts about this topic? Don’t forget — the website is there for your use 24/7/365!
|Other Developments of the Day|
It’s been a while since we saw a “Big Pharma” deal — but the latest is a whopper! Pfizer (PFE, Weiss Ratings: B) said it would buy Hospira (HSP, Weiss Ratings: B) for $17 billion, or $90 a share, in cash. That’s a 39 percent premium to where Hospira closed yesterday.
Pfizer is one of the largest drugmakers in the world, and it wants Hospira for its injectable and generic drugs. The deal should boost per-share earnings by as much as 12 cents in the first year after it’s closed.
The health insurer Anthem (ANTM, Weiss Ratings: B+) is just the latest giant corporation to get hit with a hack attack. Unidentified hackers penetrated its network, which contained names, birthdays, and social security numbers for roughly 80 million customers. There’s no word yet on how many of those records were stolen, or whether any of them have been used in identity theft cases or other malfeasance.
The end of the RadioShack era appears to be at hand. The electronics, cell phone, and cable and adapter vendor is reportedly on the verge of filing for bankruptcy.
It plans to sell hundreds of its 4,000 retail locations to Sprint (S, Weiss Ratings: D), and close a couple thousand more. That’s going to leave a lot of empty storefronts in strip malls and shopping plazas across America.
The Middle East nation of Jordan executed two prisoners it had been holding for years in response to ISIS’ horrific murder of pilot Muath al-Kaseasbeh. The staunch U.S. ally also pledge more retribution against the terrorist group, and the U.S. may be called upon to provide additional logistics or intelligence support.
Does this mean even more turmoil in the Middle East? Are you worried about the security of your personal data in light of Anthem’s mega-hack? Any thoughts on other topics of the day? Let me know over at the website when you have a few minutes tonight or tomorrow morning!
Until next time,