The stock market has rebounded off its early morning lows with losses turning into widespread gains. Investors are reacting to the healthcare vote on Sunday and they seemed relieved that it's over. Democrats managed to pull ahead with a victory on the most transformative piece of healthcare legislation in the last forty years. Meanwhile U.S. dollar weakness tried to give commodities a boost. Crude oil is up 51 cents near $81.19 a barrel. Gold futures are surprisingly down with a $5 loss to $1,102 an ounce. Copper and silver both gapped open lower but have bounced back to nearly unchanged.
Asian markets were mixed. The Chinese Shanghai index gained 0.22% to close at a three week high. The Hong Kong Hang Seng fell over 2% to close at two-week lows. The Japanese market was closed today. Chinese regulators did say they had approved the first round of six brokerages to offer margin trading and short selling of stocks. Both forms of trading should be launched soon.
Monday turned out to be a rocky session for European markets. Banks declined on fears over Greece and Dubai debt. Commodities sank on the rate hike from India last Friday. The Greece problem is really heating up. Greek Prime Minister George Papandreou told EU leaders that if some sort tangible aid package did not surface at this week's finance summit, his country would seek aid from the IMF. Meanwhile Germany is having second thoughts. Germany is the largest economy in the euro zone and most Germans do not want to bailout Greece. This puts German Chancellor Merkel in a bind. Her political party is facing elections this year and as a result German leaders are suggesting that Greece needs to solve its debt problems by itself. By day's end the largest Greek banks saw their stocks decline by an average of 5%. All the major European markets were sliding lower most of the day but managed to reverse in the last two hours and climb back to nearly unchanged. The German DAX closed up +0.08%. The French CAC-40 rose +0.07%. The English FTSE slipped -0.1%.
Here at home in the U.S. today's news is all about the healthcare bill and what happened over the weekend and what happens next. The healthcare industry is nearly one sixth of our economy and the changes proposed by this healthcare bill will touch nearly every American. Congressional Democrats managed to pass the bill with a vote of 219 to 212 on Sunday. While the Democrats claim victory and send the bill toward Obama to be signed into law the fight rages on. Several state governments are already planning legal battles to challenge this bill. Some opponents claim it's unconstitutional to force citizens to buy any product. Conservative groups and lawmakers are already claiming they will repeal this bill.
Elsewhere Bloomberg ran an article on the bond market and noticed that investors feel it is safer to lend money "to Warren Buffett than Barack Obama." Yields on a two-year note sold by Berkshire Hathaway are yielding 3.5 basis points less than U.S. treasury two-year notes. Normally U.S. government bonds are seen as the safest investment and thus offer the lowest yield. Yet out of control spending has pushed U.S. debt toward World War II levels and Moody's is warning that the U.S. is quickly moving toward the day it will lose its "AAA" credit rating. By the year 2013 more than 10% of our tax revenues will be used to make debt payments.
At the moment stocks continue to drift higher. The S&P 500 is up 0.5% near 1165. The NASDAQ composite is up 0.78% and challenging resistance near the 2400 level again. The Dow Industrials are up 0.48% and testing resistance near the 10,800 level. The small cap Russell 2000 is seeing a nice bounce with a 1% gain. Some of the best performers today are gambling stocks (+4.7%), semiconductors (+2.0%), airlines (+1.75%), cyclicals (+1.4%), homebuilders (+1.2%) and networking stocks (+1.1%). The worst performers are commodities with oil and mining stocks trending lower.
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index: