The U.S. market is bouncing on rumors that the Germany and the EU is preparing an aid package for Greece. This news boosted the oversold euro, which sent the dollar lower. Dollar weakness is feeding a widespread bounce in commodities. Crude oil is up 2.4% near $73.65 a barrel. Gold futures are up another $10 to $1,076 an ounce.
Asian markets were mixed. The Japanese NIKKEI extended its losses to four days in a row with a 0.19% decline on Tuesday. Toyota Motors is bouncing even though the company announced it was recalling 437,000 hybrid cars around the world to fix a potential problem with the brakes. Toyota's recall is now up toward 8 million vehicles. This fiasco has shaved off more than $30 billion in market cap in just the last couple of weeks although today shares of TM are bouncing. Chinese markets were up. The Chinese Shanghai index gained 0.4%. The Hong Kong Hang Seng rallied 1.2% ending a three-day losing streak. The Hong Kong market will be closed on Wednesday.
It was a volatile day in European markets. The region had rallied throughout much of the day only to plunge late this afternoon into negative territory. A very late day bounce saved the session and stocks closed fractionally higher. The French CAC-40 gained 0.15%. The German DAX rose 0.24%. The English FTSE gained 0.38%.
There was bearish economic data out of Britain this morning. The country's trade deficit rose to its widest point in a year while January retail sales fell to their lowest levels in 15 years.
The real story today was an aid package to Greece. Yet there seemed to be confusion over where it was coming from. One story suggested Germany was preparing an aid package for Greece. Another suggested the EU region would prepare a bailout. This fueled the bounce in both European and U.S. markets and gave the euro a lift. Yet later in the day a euro-zone spokesperson said there was no help on the way and Germany denied any reports they were coming to the rescue. It's definitely a slippery slope. If the EU does bailout Greece then Portugal, Spain and Italy will expect one as well. EU leaders will be meeting on Thursday with a special summit on the economy.
Here at home in the U.S. the economic data was bearish. Economists were expecting wholesale inventories to rise 0.5%. The Commerce Department said December's wholesale inventories actually fell 0.8% following a 1.6% rally in November. We had been waiting for months for business to start restocking their shelves and November's report suggested the rebuilding cycle had begun. To see December's wholesale inventories decline really puts a damper on the idea that businesses are confident enough to keep the trend alive. If companies are not restocking their shelves and rebuilding their inventories from extremely low levels then GDP growth is going to suffer.
Investors are completely ignoring this news. The bailout rumor for Greece started the short covering and now the short covering is feeding on itself. Morgan Stanley upgraded the industrials, which only fanned the flames of this rebound. As part of their upgrade they raised Dow-component Caterpillar (CAT) to an "overweight", which has powered a 5.8% rally in shares of CAT. Dow-component Coca-Cola (KO) is also in rally mode with a 3.6% gain following its earnings report this morning. KO actually missed estimates by a penny but sales overseas more than made up for weakness in the U.S. KO's volumes in China grew 29% and in India they grew 20%.
Currently the markets are seeing a widespread bounce with only the homebuilders in negative territory (-0.3%). The best performers are energy stocks, casino stocks, networking, airlines, and the metal and mining stocks.
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
A quick glance at the OptionInvestor.com play list reveals FCX is up 4.3% on the session. Actually most of our candidates are up with the market in rebound mode. GYMB is testing resistance near $42.00 and could breakout. INFY is seeing a big bounce and could hit our trigger to buy puts soon.