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Courtesy of Scott Martindale, Senior Managing Director, Sabrient
Investor distress and uncertainty remain elevated from ongoing natural disasters, mixed economic reports, zero jobs growth, unclear future Fed stimulus, Obama’s jobs plan, and very real European solvency concerns. However, a German court rejected a lawsuit to prevent Germany from participating in European Union bailouts, and the Wednesday rally was on in Europe and spilling over into the U.S. markets, as the S&P 500 closed up nearly 3%.
With Wednesday’s strong rally, gold took a breather and settled down -2.9%. But oil was strong, finishing up +3.9% and carrying the Energy sector along with it. Top-ranked oil stocks in Sabrient’s algorithms were among the leaders, including HollyFrontier (HFC) +8%, Stone Energy (SGY) +7%, and Tesoro (TSO) +5%. The Financial sector was the big leader of Wednesday’s rally, gaining +4.8%, led by Bank of America (BAC) +7%.
Thursday will be a big day, however, with jobless claims in the morning, the European Central Bank (ECB) rate announcement and press conference with Jean-Claude Trichet, Fed Chairman Bernanke’s speech on the economy in the afternoon, and then President Obama’s jobs creation plan in the evening. The market will be on the move. Obama wants to jumpstart employment by injecting more than $300 billion into the economy next year, mainly through tax credits and infrastructure spending and providing help for the long-term unemployed.
Presidential candidate Mitt Romney released his jobs plan in advance, which includes reducing the corporate tax rate from 35% to 25%, cutting government spending by 5%, waiving “Obamacare” healthcare reform, and boosting domestic energy production. Romney called Obama’s plan an antiquated “payphone strategy…in a smartphone world…”
Keynesian economist and NYU professor Nouriel Roubini thinks that the global economy is in a worse situation than in 2008. “This time around we have fiscal austerity and banks that are being cautious,” he says. The notorious perma-bear believes that a U.S. QE3 wouldn’t have the necessary effect without European stimulus, as well. He thinks that the bond market is already indicating an imminent recession, and he gives a “double dip” a 60% chance by 2012, and he believes China and Brazil are at risk of a “hard landing,” as well.
To be sure, European markets have been quite weak. Have you seen Greek bond yields recently? The 10-year…
