EmailIt was a mixed-up day yesterday. Apple (AAPL, -6.4%) got clobbered; Citigroup (C, +6.3%) and Bank of America (BAC, +5.6%) soared; the Dow (+0.6%) handily outperformed other indices since it is Apple-free; the defensive-oriented Utilities sector (+1.6%) led all sectors; and Treasuries moved up in tandem with the broader market.
There was some commentary during the session suggesting political leaders are intent on reaching a fiscal cliff solution -- temporary or otherwise -- before the Christmas break. Then, after the close, Treasury Secretary Geithner said in a CNBC interview that the White House is absolutely ready to go over the fiscal cliff if the GOP doesn't agree to raise tax rates on the wealthy.
It was all very odd.
There are plenty of theories as to why the market behaved the way that it did. Most theories are reasonable, and at the same time disputable. We don't have any unique insight on things. Yesterday simply struck as a terrible, horrible, no good, very mixed-up day.
Today will hopefully have some more clarity to it. At the moment, though, there isn't a definitive read on things. The S&P futures are pointing to a flattish start for the cash market.
That is a deviation from the modest gains seen in most European markets, which looked past an S&P downgrade of Greece to 'Selective Default' and keyed off a better-than-expected factory orders report in Germany.
On a related note, the Bank of England and the ECB held policy meetings today. Both banks, as expected, left their key lending rates unchanged at 0.50% and 0.75%, respectively.
Notably, the ECB lowered its growth projections for 2013 and 2014, saying it sees 2013 GDP between -0.9% and +0.3% and 2014 GDP between -0.2% and +0.2%. Its prior projection called for 2013 GDP growth between -0.4% and 1.4%.
It is clear the effects of fiscal austerity in the eurozone continue to bite. That is a point highlighted in this week's Big Picture column, which discusses the view that the eurozone's experience with fiscal austerity could be an illustrative case for the US.
There was little reaction to the latest initial claims report even though it was better than expected.
Claims for the week ending December 1 dropped by 25,000 to 370,000 (Briefing.com consensus 382,000). Continuing claims for the week ending November 24 declined by 100,000 to 3.205 mln (Briefing.com consensus 3.275 mln).
It appears that the initial claims distortions caused by Superstorm Sandy have eased. What we see today in the claims level is basically what we saw prior to Sandy -- claims that are bounded between 350,000 and 400,000.
This report doesn't have any bearing on tomorrow's nonfarm payrolls report. The only connection is that the November payrolls data will be distorted by the effects of Superstorm Sandy.
(Editor's note: we screened for S&P 500 companies that derived at least 30% of their revenue last year from Europe. 45 companies were returned in the screen. We included companies that report an EMEA segment, assuming most of the revenue was generated in Europe. If you would like a copy of the list of companies from our screen, please email me.)
