Dow 13,009 (-.23%) S&P 1,370 (+.04%)
An eventful weekend it was. While America carelessly watched jockeyed horses run a lap around a field of inebriated college students on Saturday, our European counterparts experienced political elections that had more at stake than the highly wagered Kentucky Derby. The Greeks expressed their discontent for the current debt bailout in the form of an election instead of the usual riot, while France ousted President Nicolas Sarkozy with a Socialist opponent. As European investors saw their political landscape realign, reassuring words from Warren Buffett on the health of the American banking system offset much of the blow. The Dow still ended down just 30 points to start the week.
Greek and French voters change political leadership
Greek voters sent a clear message at the polls on Saturday that they are unhappy with the bailout and are unwilling to let foreign creditors determine their livelihoods. The mainstream political parties that agreed to the terms of the Greek bailout were shunned by voters who voted in favor of more radical, anti-bailout groups that would rather leave the Eurozone than follow German-dictated order (one of the parties voted into Greek Parliament is advocating for Germany to pay WWII reparations). Analysts at the investment bank Citigroup even predict a 75% chance that Greece drops the euro currency by 2013. Meanwhile French Socialist candidate Francois Hollande defeated incumbent Nicolas Sarkozy for the French presidency. Hollande has spoken about the need to balance stimulating growth policies to help Europe get out of recession, as opposed to the German dictated austerity policies to reduce government debts. The French outcome was largely expected by the markets so the uncertainty had already been “priced-in” to stocks (most European markets were slightly up today on other news) – The major question now is how, and if, Germany will agree to loosen its kung-fu grip on the conviction that austerity is the only way out of this crisis.
Warren Buffett’s confidence in US Banks sends financial stocks up
We’re sure there are some very nice parts of Omaha, Nebraska, even if the landlocked metropolis is not a foodie, shopping or beach destination. But for one day a year, investors’ eyes turn to the middle-American city for its famous investor day, when legendary stock guru/billionaire Warren Buffett of his Omaha-based investment firm Berkshire Hathaway (BRK), sheds wisdom on the markets. His specific statement today that American banks “have liquidity coming out of their ears” and are in much better shape than European counterparts had an immediate impact on investors. Buffett’s words carry significant weight and his vote of confidence in US banks having resources to lend money and stimulate economic growth injected optimism into financial stocks – Citi (C), JP Morgan (JPM) and Wells Fargo (WFC) were all up today, with Bank of America (BAC) jumping over 2%.
- Disney (DIS) advanced more than 2% after The Avengers, a super hero orgy-of-a-film featuring every tights-sporting do-gooder of the last half-century, brought in over $200 million during its opening weekend. The record-setting box office revenues will undoubtedly buoy Disney’s 2nd quarter earnings. How will Disney fare in its 1st quarter earnings announcement tomorrow after the drag of 2012′s biggest movie bust, John Carter?
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