The move up from the lows of Monday PM has been pretty impressive. We had some profit-taking at the end of the day today, but all in all, it has been a good couple days for stocks. We broke above the downtrend line of the last few weeks which is a very good sign.
Helping the market has been the hopes that the Eurozone will find a way to manage a Greek default in such a way that Greece stays in the Eurozone and the big banks, mainly French will be given enough capital to remain solvent. Angela Merkel seems particularly keen on keeping things together in the Eurozone, even though there is mounting opposition in Germany to more bailouts. It may be that they will come up with a solution that while costly, will kick the can down the road a ways on Greece and hopefully keep Portugal and Ireland from default and maybe at the same time keep rates on Italian bonds from rising too much.
What they are really doing is trying to limp along as long as possible and hope for growth to pick up and make things better. I don’t look for significantly more growth for at least a year or two and Greece just does not seem to have the political will to give up all their socialist benefits in order to close their sizeable deficit. The IMF also needs to be persuaded to play along. I just don’t thinks are going to work out as well as they hope. As to when that becomes apparent to the markets, that is anyone’s guess.
Stocks in the US were up 1.25% – 1.75%. Bonds were flat to up. Gold and oil were lower.