Dow: 12,879 (-0.71%) S&P 500: 1,365 (-0.74%)
European Central Bank President Mario Draghi’s antics of the past two weeks remind the MarketSnacks team (and some disappointed high school co-eds) of none other than “The Sherminator” from the 90′s family friendly film American Pie. Draghi over-promised, by pledging he would do everything to save the euro, but under-delivered, offering just the status quo solution to the Eurozone‘s debt crisis today. Stocks in Europe were way down and the pessimism overseas seeped into American stock markets. Some US jobless claims data was in line with expectations and newspapers are still peppered with headlines on Knight Capital‘s epic technical blunder that may bring the brokerage firm under. The Dow dropped 92 points for its 4th straight loss on the eve of July’s government jobs report.
ECB statement yields no promising fix to the European Debt crisis
Mario Draghi announced the European Central Bank’s newest strategy to squash the debt crisis today and it was nothing investors haven’t heard before. He said that the central bank and the bond-buying program set up by the Eurozone would step in and buy the bonds of struggling governments (namely Spain and Italy) if their borrowing costs get out of control. This strategy has been used in the past, and clearly was not an effective long-term solution as we currently face the same problems of last year. Investors wanted a much meatier and conclusive policy plan, especially after Draghi’s bold promise last week to do whatever it takes to preserve the Euro. Investors sold the bonds of Spain and Italy today, causing prices to fall and yields to rise. Today didn’t seem to move us much closer to the end of the crisis, so high yields for Spain and Italy (a measure of a government’s borrowing costs) aren’t leaving anytime soon.
Weekly Jobless Claims rise slightly, but less than expected
The number of Americans filing for unemployment for their first time increased by 8,000 over the last week, less than economists expected. After three volatile weeks of up-and-down movements thanks to seasonal auto factory shutdowns, total jobless claims were 365,000, in sync with their 4-week moving average. With July’s average down 20,000 from June’s average weekly jobless claims, investors have more reason to hope tomorrow’s major monthly employment report from the government will show signs of some much needed-spice on the US job market.
Knight Capital trading glitch costs brokerage firm $440 million
We send our condolences to the agility-challenged intern who tripped and yanked out the wrong power cord. Computer glitches at the large brokerage firm Knight Capital (KCG) disrupted trading in over 140 stocks yesterday morning, causing errors and mass confusion (picture a slightly less extreme version of the Gotham Stock Exchange rampage from The Dark Knight Rises) – and worst for Knight’s bottomline, no more taking stock orders for the day. After dropping over 30% yesterday, Knight fell another 63% today on news the f-up cost the firm $440 million (over 4 times the firm’s entire earnings of last year). Not to rub any more salt on the trading floor wounds, but some good ol’ burnin’-the-midnight-oil MarketSnacks detective work revealed that Knight is the same firm whose analysts similarly disrupted the New York Athletic Club this past spring by starting a huge fight in the dining area. Coincidence? Yeah, probably.
- Huge day for econ data, have a big breakfast
- The Labor Department’s eagerly anticipated “Non-Farm Payrolls” employment report for July
- The “ISM Non-Manufacturing” report for July
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