Stocks had a nice day today, led by European stocks that were up roughly 1.4% – 1.9% today. U.S. stocks finished up 1% – 1.7% with small stocks leading the way. The market pulled back from a short term resistance level late in the day but still had a very good day. We’ll take 1% in a day anytime.
Why were stocks up? It kills me when newscasters give a single reason for a day’s market action. It is rarely that simple. Today may have been little more than a continuation of the rally that started last Thursday.
Some will say it was bad news is good news. They would take that from Spanish bond yields having risen to levels far too high for comfort along with weaker German industrial numbers. The thought is that together they might lead Central Bankers to again interfere in the markets in a short-term stab at pushing rates lower and markets higher.
It is so very telling that markets have come to count so much on government intervention. Government as savior has become the consensus. This is unhealthy not only for monetary stimulus but also fiscal (spending) stimulus.
The main hope seems to be for more loans to troubled European countries. So far that has worked only as a stalling tactic and there is something to be said for that when fear is as high as it was in 2008-09. But, now as a long-term hope it is far less compelling to me. As I wrote recently, fighting excessive indebtedness with more loans is a bit bizarre.
The main hope for Europe long-term is the move toward Euro-wide banking guarantees and tighter control over Eurozone spending. The latter will happen much more quickly than the latter and with much higher odds of actually happening.