EmailThe S&P 500 eked out a tiny gain yesterday on weak volume and ended the session less than a point higher than where it closed on August 17.
A lot has happened since then. The fact that the market has gone basically nowhere speaks to the perpetual sense of uncertainty that has diluted any sense of conviction behind trading positions.
The presidential election outcome was thought to be uncertain until it was all but certain early on election night that it wasn't even close. The eurozone's commitment to saving Greece was questionable until there was no question that eurozone leaders had acquiesced again at the eleventh hour to save Greece. We may go over the fiscal cliff or we may not.
The one constant through the months has been easy monetary policy. That has been the market's woobie in times of uncertainty and it has been the market's power booster in times of reduced uncertainty.
Fittingly, the Fed starts its two-day FOMC meeting today. It is widely expected that the FOMC will announce a new plan to buy long-term securities after Operation Twist ends. The main difference is that the new purchases (versus those made with "Twist") will be unsterilized. That is, the new plan will carry the moniker of "QE4."
We will learn more with the release of the policy directive tomorrow. In the meantime, the market is called to open higher today to the tune of about 0.4%.
Reports indicate a stronger-than-expected investor sentiment reading out of Germany has served as the catalyst for the positive bias. Specifically, the ZEW Economic Sentiment Index jumped to 6.9 from minus 15.7 in November.
That's right. The ZEW Index of all things is driving global markets. It is aptly named because the global markets are a bit of a zoo themselves. Still, we can't help but think fondly of a time when the ZEW Index had little impact beyond the German border.
That is the essence of the market these days though. It is desperate for any trading catalyst in the face of uncertainty, so much so that it attaches undue importance to economic releases that aren't all that they are made out to be in the daily back and forth of the headline rush.
Speaking of economic releases, the October U.S. Trade Balance, which is just a tad more important than the ZEW index, widened from a downwardly revised $40.3 bln (from $41.5 bln) in September to $42.2 bln in October. The Briefing.com consensus expected the trade deficit to increase to $42.8 bln.
Both exports and imports fell by $6.8 bln and $4.8 bln respectively. The real goods deficit actually declined in October (from $46.6 bln to $46.2 bln), suggesting that the increase in the deficit was the result of price growth and not stronger net trade demand. The S&P futures market barely budged after the release.
Fortunately, though, US business are considered to be worth more today because investor confidence is up in Germany.
