Intraday Market Update
Markets across the world surged higher overnight after global policymakers revealed an emergency aid package worth about $1 trillion in an effort to stabilize financial markets and backstop the entire Euro zone. The US Federal Reserve reopened currency swap lines while the European Central Bank announced they would buy debt, which is a quantitative easing measure designed to inject liquidity into the markets. All major US indices gapped significantly higher at the open and have gained approximately +4% in mid day trading. The S&P 500 is found resistance near 1,160 which is just above the price levels before Thursday's big plunge. The index is now trading around 1,150. The VIX is down -26% to about $30.00 but still above levels not seen over the past 5 to 6 months, excluding the spike last Thursday and Friday.
The bailout package is being met with skepticism by some industry experts and leaders. The International Monetary Fund's head of Europe, Marek Belka, said it remains to be seen whether the Euro zone has enough political determination to implement the $1 trillion emergency aid package. Further, Belka said the loan fund is merely a short-term solution and "it remains to be seen how sustainable this is." PIMCO's CEO and Co-CIO Mohamed El-Erian warned that many questions were left unanswered in the plan, while the ECB's president, Jean-Claude Trichet, warned that the ECB's decision to buy debt was not unanimous. Trichet also tried to silenced critics who are worried about the ECB's independence by reiterating that the central bank remains "fiercely and totally independent." In a Bloomberg radio interview New York University professor Nouriel Roubini said "while money is available now on the table, all this money is conditional on all these countries doing fiscal adjustment and structural reform." "Whether theyâ€™ll be able to do it fast enough over time is going to be an open question."
In equities, all sectors are sharply higher with banks and home construction leading the way. Goldman Sachs (-1.00%) has been a laggard as it warned in its quarterly filing that it expects more lawsuits to be filed over CDO's, suggesting that the bank's troubles may not be over and could extend beyond the Abacus CDO debacle. Fannie Mae reported a first-quarter loss of more than $13 billion, compared with a loss of $23.2 billion in the same period last year. Fannie Mae has asked for an additional $8.4 billion in aid from the US Treasury and also indicated the possible need for more in the future.
Commodities are mostly higher with Front month crude higher by +1.75% to $76.50 per barrel. Crude oil was as high as $78.50 per barrel. Gold is negative by -$8.90 per ounce, or -0.73%. Natural Gas rebounds $4.18 (+4.31%). Silver is higher by +0.64% while copper has gained +2.67%.
Global markets throughout the world were higher on Monday. Leading markets in the Asia-Pacific region were Australia (+2.66%), Hong Kong (+2.54%), and Japan (+1.60%). China was higher by +0.39%.
European markets sharply higher led by gains in Spain (+14.43%), Italy (+10.49%), and France (+9.66%). Shares in London and Germany were both positive by more than +5.00%.
Core Sector List:
Overall reading: 16 sectors advancing, 0 sectors declining.
Strongest Sectors: Home Construction, Insurance, Banks, Semiconductors
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