Il Primo Ministro greco Lucas Papademos riceve l'approvazione del governo su tagli al bilancio che corrispondono al 7% del Pil nei prossimi tre anni e su una ristrutturazione finalizzata a ridurre di €100 mld gli oltre €200 mld di debito detenuto dai creditori privati, atteso il voto del parlamento • Standard & Poor's declassa il merito creditizio di 34 banche italiane tra cui UniCredit a BBB+ da A, Intesa Sanpaolo a BBB+ da A e Banca Monte dei Paschi di Siena a BBB da BBB+, S&P anticipa "una redditività decisamente debole per le banche italiane nei prossimi anni" • La produzione industriale italiana aumenta a dicembre +1,4% da novembre +0,3%, oltre le stime degli economisti +0,5%, anche se i dati del quarto trimestre -2,1% suggeriscono che la terza economia della zona euro è entrata nella seconda recessione dal 2009 • I Btp decennali salgono per la quinta settimana consecutiva, il periodo di recupero più lungo in oltre cinque anni, la prossima settimana il Tesoro vende €4 mld di buoni al 6% con scadenza 2014 • L'euro cala dal massimo di due mesi contro il dollaro, il mercato azionario europeo cala dal massimo di sei settimane e l'azionario Usa registra la prima settimana di perdite del 2012 dopo che i ministri delle finanze europee non hanno concesso il pacchetto di aiuto necessario a prevenire il collasso economico della Grecia

giovedì 23 febbraio 2012

Market Comment - February 23

(Marco Bonelli) I am curious what the reason will be that drives investors to buy stocks now or even later after a widely expected (small) correction!

With that, I am referring to the upcoming corporate news vacuum after the Q4 earnings season (by yesterday, 440 of the 500 S&P companies reported), which leaves investors with a mediocre season, that delivered many positive surprises but also a lot disappointing guidance for Q1 (recent reports by many retailers, TOL, FWLT support that and weak reports and outlook by DELL, HPQ and ADI shows that even in the sector that demonstrated the best earnings picture in Q4, the outlook is not as rosy as broadly expected).

I am also referring to the risk of lower than expected economic data, which is normal after many weeks of better than expected numbers but poses a serious risk to the perception of a still fragile economic recovery that faces many headwinds. Weaker than expected Existing Home Sales for December and January (although the numbers still show a healthy uptrend)) yesterday adds to the weaker industrial production and retail sales last week. So far the market didn't see a really bad number but if it does, I'm not sure if the market brushes it off easily.

So the current optimistic fundamental outlook is debatable and sentiment is quite in the bullish camp, how about liquidity? Undoubtedly money is available for investment and central banks provide extra liquidity with an ultra-easy monetary policy approach but as long as there is uncertainty around the fundamental picture and as long as fundamental expectations are not really backed up by fundamental reality, the liquidity argument only works temporary and at this point probably doesn't really kick in.

Psychologically it will also be the question if the little profit-taking we have seen so far and the more profit-taking we might see in the near-term future isn't just the first step in the process of thinking the investment thesis (that dominated over the last two months) over. Weak earnings guidance (backing up Bloomberg data that shows that S&P500 earnings growth expectations came down to -0.4% in Q1 and +1.3% in Q2), more weaker-than-expected economic numbers will certainly help in that process. Therefore, I have difficulty to believe that traders and investors will blindly dive into stocks on any weakness and drive prices up to new highs. We will most likely see rebounds but Dow Jones 14000, SPX 1500 or Nasdaq 4000 as the next goal of the current rally doesn't really match with the underlying fundamental picture.

That said, the Dow Jones Transportation Index continued its correction (now 4.92% below the highs from February 3), broke its 50day MA and could have started the completion of a small head-and-shoulder formation that could easily deliver another 5% downside. More profit-taking also kicked in at the high-flying homebuilding sector, some technology sub-sectors, specialty retailers, biotechs and financials, while market breadth in the Nasdaq recorded the second weakest level so far this year.

Maybe the signs are too obvious and the market manages to hang in a little longer, which will provide more opportunities to lighten up or sell positions ahead of some prolonged weakness in the upcoming months.

Trade well and watch out!

(Marco Bonelli is the Managing Director of International for CL King & Associates in New York. The opinions expressed are his own.)

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