WASHINGTON, Dec. 3, 2015 – It’s another mixed day on Wall Street today, with markets down moderately to hard on unexpectedly negative news from the Eurozone. In a nutshell, markets had been pumped for ECB Prez Mario Draghi to announce a bigger and better stimulus program for the Eurozone. Instead, investors got yet another head fake from the ECB, which seems determined to persist in its deflationary, recession-causing problems rather than solving them.
Draghi the Drag
ECB continuing reticence toward doing anything constructive or dramatic is predicated on pleasing the wealthy elitists who’ve essentially taken over ruling the countries in the Eurozone, with the notable exception of Britain and the few other Euro-economies that retain their own currencies and control their own fates.
The result of Draghi’s dithering—likely caused by pressure from these elites—was nicely parsed this morning in an article by CNBC’s Patti Domm:
The dollar index sank as the euro abruptly sprinted higher after ECB President Mario Draghi announced an increase in the type of bonds the ECB would buy, but not an anticipated increase in the 60 billion euro bond purchases. The ECB also announced a negative 0.30 deposit rate, when some analysts expected a minus 0.40 percent rate. The easing package comes as the Fed gets set to take an opposite tact [sic] and tighten policy with a first rate hike later this month.
“This is a bit of a watershed event. I think that part of the violent reaction in markets is this is the first time Draghi was rebuffed,” said Robert Sinche, global analyst with Amherst Pierpont. “An internal ECB issue becomes an external markets issue. This is not insignificant. From now on when Draghi makes his comments, people will say ‘maybe.’ There’s never been a ‘maybe’ around Draghi’s comments since he said he’d do whatever it takes.”
The news went to the heart of a very crowded trade — long dollar, short euro.
It’s the final sentence above—emphasis by the Maven—that sums up this morning’s stock market action. Assuming a Fed rate hike here coupled with more stimulus in Europe has caused the euro to tank vs. the dollar over the past week. The Euro ticked the $1.05-zone recently, closing in the neighborhood of $1.06 at Wednesday’s U.S. market close.
But today, voilà! The euro is now up a whopping three cents as of the noon hour EST, trading at $1.0927 vs. our beloved Bucky. In currency trading, a penny in one day is regarded as a huge move. Today, the euro was marked up 3 pennies, indicating a rout in the currency futures markets and causing, we think, a ripple effect on stocks, with all three averages down from slightly less than 1 percent to a bit more on the tech and biotech-heavy NASDAQ and S&P 100.
But on the plus side for the Fed, this ECB stasis will make it easier to institute a small rate hike, likely to be announced this month.
Oil is mildly happy Thursday
At least oil is catching a bid Thursday morning, with WTI solidly above the $40 mark today after taking a scary dip below that key price on Wednesday as the dollar continued to gain against the euro. But if the dollar weakens, oil prices will tend to stabilize or increase, since at least currently, oil is generally priced in terms of the U.S. dollar.
Today’s reversal, however long-lived it might be, could put a temporary floor under oil. That said, trading in oil related companies is negative today, indicating skepticism still lingers on this point.
Away from the market itself, Ford (symbol: F) attracted some positive attention today, although not quite enough to move it out of its current and (we think) undeserved slump. Knocked for years for the clunky Microsoft (MSFT) driven communications systems installed in its cars and trucks, its recent models have moved away from MSFT, implementing a more flexible, user-friendly interface.
Good thing, too, as the sometimes politically-driven Consumer Reports has bad-mouthed Ford’s otherwise excellent vehicles for years due to reader complaints about the MSFT-driven system, hurting overall ratings for Ford vehicles.
Does Ford have a better idea?
But Ford has just announced that it’s releasing a new software update “for more than 5 million SYNC-equipped vehicles dating back to the 2011 model year,” according to a company release. Today’s update adds “more convenience for Apple iPhone users with Siri Eyes-Free capability.”
“Siri Eyes-Free,” continues the release, “allows drivers to activate Siri with a long press of the voice recognition button on the steering wheel…. Drivers can use [voice commands] to ask Siri for requests including:
- Making phone calls to contacts in their address book
- Looking up phone numbers for restaurants or other points of interest
- Setting a reminder or alarm
- Asking about the weather
- Select and play music
- Audibly send and receive text messages
- Getting directions through Apple Maps”
Ford’s release adds the following helpful info:
The new software update is available for vehicles equipped with the second generation of SYNC, known as MyFord Touch in North America, ranging from model years 2011 to 2016.
The simple, downloadable update will be available through http://owner.ford.com/.
Well, at least one company is still consumer-focused today instead of wasting money on stock buybacks to “enhance shareholder value” while the number of middle-class shareholders continues to decline as, one by one, they all go broke under the current regime. (And no, we get no backsheesh from Ford for mentioning this, although we do hold 300 shares of Ford stock.)
This consumer good news at least balances some of the bad, elitist central bank news, making Thursday a relatively neutral day especially if you’re not a trader.
Today’s trading tip
If you are a trader, however, it’s time to consider that old portfolio standby in times of uncertainty or trouble, the double-short S&P 500 ETF that trades under the somewhat sinister symbol of SDS. We picked up 100 shares of this volatile puppy yesterday and may add more if it looks like markets are going to deteriorate further. Home gamers, however, are advised to deploy this ETF with caution if at all.
If you’re not at your computer screen most of the day, SDS could get away from you if the market takes a contrary turn. We certainly don’t regard SDS as a long-term investment—only as a hedge to protect those stocks in your portfolio you want to continue to hold, even in a nasty downturn as we may be about to experience.
The rest of today’s negative market reaction to Draghi & Co. makes us cautious on pretty much everything else, as evidence mounts that what’s left of 2015’s early and weak Santa Claus Rally may already be running out of steam. Mr. Market should let us know soon. Until then, caution is the watchword.