Naughty or Nice for the markets?
Yet again, investors found themselves watching Europe last week – no surprises there – and were apparently pleased with what they saw. Word of a “new deal” incited a rally in stocks Friday that pushed the Dow Jones industrial average up 187 points, or 1.6%, the S&P 500 up 21 points, or 1.7%, and the Nasdaq up 50 points, or 1.9%. All major domestic indexes finished positive for the week on a wave of optimism.
What is this “new deal” everyone’s talking about? Basically, the 17 nations that use the euro agreed to sign a treaty that allows a central authority to oversee their budgets more closely. The agreement is made up of fiscal rules designed to prevent countries from veering further into crisis mode, and to rescue them if they do. The Friday proposals also commit the countries to put their €500 billion ($670 billion) European Stability Mechanism bailout fund into action next year, instead of in 2013.
While Britain chose not to support the plan, the majority of EU members are hailing this as a new beginning. German Chancellor Angela Merkel expressed that Europe has “…achieved a breakthrough to a stability union. A fiscal union, or stability union as I call it, will be developed further, step by step in the years to come." And French President Nicolas Sarkozy confidently boasted, “We're doing everything we can to save the euro.”
Whether this deal will be a new beginning for Europe, or turns out to be little more than political posturing, only time will tell. Either way, we are confident their debt saga is far from over. While tighter fiscal controls are definitely a crucial ingredient in mending this crisis, Friday’s agreement is only a partial solution, and we have seen agreements like this deteriorate before. Until a clear path to fiscal austerity has been established for the region, the markets will keep responding to hype and headlines.
When it comes to investing, rather than reacting to every shred of nice (or naughty) news, we still believe it is better to have a long-term plan and stick to it. We take great pleasure in helping you do just that!
ECONOMIC CALENDAR:
Monday – Treasury Budget
Tuesday – Retail Sales, Business Inventories, FOMC Meeting Announcement
Wednesday – Import and Export Prices, EIA Petroleum Status Report
Thursday – Jobless Claims, Producer Price Index, Empire State Manufacturing Survey, Industrial Production, Philadelphia Fed Survey
Friday – Consumer Price Index
Headlines:
Online sales for the holiday season to date (since November 1 to Friday) totaled $24.6 billion, a 15% increase over the $21.4 billion spent during the same period last year, ComScore reported. Last week's spending totaled $5.9 billion, also a 15% increase over the corresponding period last year.
Anti-Wall Street protesters plan to attempt to block major West Coast ports on Monday. By marching on U.S. ports from California to Alaska, organizers look to call attention to economic inequalities in the country and a financial system they complain is unfairly tilted toward the wealthy.
Scammers across the nation are targeting the Better Business Bureau. They're using BBB's good name to try and spread a computer virus. The scam e-mail says the BBB has received a complaint from one of your customers and says, "We encourage you to use our online complaint system to respond." When you click on the link, it reportedly installs a virus. If you receive one of these e-mails, delete it immediately and do not open the link.
Developing nations led by China and India pledged they’d work toward an agreement that would limit their fossil fuel emissions for the first time, the biggest advance in the fight against global warming in 14 years.
QUOTE OF THE WEEK:
The movie Elf staring Will Ferrell
Santa: That's another thing... Buddy you should know that your father... he's on the naughty list.
Buddy: Nooooo!
GREEN TIP OF THE WEEK:
Stop the Junk Mail
The amount of household garbage in the U.S. increases by about one million tons of trash between Thanksgiving and New Year’s, according to the EPA, and much of that is Christmas gift packaging. If you’re mailing gifts, use recycled packing materials like newspaper and cardboard. Shiny, metallic, and plastic-coated wrapping paper can’t be reused or recycled, but there are lots of wrapping papers and ribbons that are made of 100 percent recycled waste, and gift bags are a great reusable option.
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