Dow: 13,333 (+0.07%) S&P 500: 1,437 (+0.21%)
Some folks casually call Wednesday “hump” day…that’s a damn understatement. Between the major German court decision on the legality of the Eurozone bailout, an epic Apple iPhone 5 unveiling and the beginning of the 2-day Federal Reserve policy meeting, today felt more like an aggressive ascent up a Six Flags roller coaster, Red Bull in hand. While investors wait for stimulus news from the Fed in their announcement tomorrow, Germany and Apple (literally) stole the spotlight: After popping 50 points in the morning on the fresh breakfast news out of Europe, the Dow finished the day up 10 points.
European Markets Celebrate German Court approval of European Bailout Fund
Ja! Ze Bailout Fund is A.O.K. The MarketSnacks team has always thought that the German word for “yes” sounded so much funnier (mainly less scary) than the word for “no” (Nein Nein Nein! has been a popular phrase to describe German sentiment throughout the Euro debt crisis). Today the German Constitutional Court loudly proclaimed “yes” and approved the legality of the European bailout mechanism. As the largest and most powerful country in the Eurozone, the ruling was needed to validate recent developments that have stabilized the euro. Had the court overruled the bailout fund, months of progress would have been erased and the crisis would have hit new moral lows. But the reaction was celebratory – European stock markets hit multi-month highs and the Euro currency is the strongest since March. The court ruled that the European Stability Mechanism (a.k.a. the euro bailout fund which will be used to purchase bonds of struggling countries) did not violate the German Constitution - as long as Germany’s contribution (currently 190 billion euros) cannot increase without German parliament approval. The German Chancellor Angela Merkel applauded the victory for European unity and was proud of her country’s support of the region.
Apple reveals iPhone 5 and highly-anticipated new products
Babe Ruth, Michael Jordan, Wayne Gretzky, iPhone 5. The most anticipated technology release in the last year finally arrived today during Apple’s (AAPL) release of the new iPhone. Improvements from the last iPhone include: a larger 4-inch screen, a faster processing chip, access to 4G, a better camera and a sexier, thin design. Apple junkies believe this will undoubtedly be the most-sold mobile phone of all time as it’s set to hit stores next week in 9 countries and 20 more the week after. The concern for investors will be Apple’s ability to keep up with product orders and the putting it in consumers’ hands quickly. Coming off a lighter than expected 2nd quarter earnings report (iPhone sales slowed as consumers waited for the iPhone 5), the speed at which these puppies fly off shelves will weigh heavily on Apple’s stock. Apple also unveiled a redesigned iPod touch and iPod nano with a bigger screen and a home button – the stock added just over 1% since expectations were already so high for today’s announcement.
- Post lunch media blitz: The Federal Reserve states monetary policy at 12:30 sharp. Everyone who’s anyone expects the Fed to enact new stimulating policy, namely another round of quantitative easing to lower interest rates and try to end the 43 straight months of unemployment >8%. That’s a US record that nobody’s proud of.
- We think the founders of Airplane company Airbus could have thought of a prettier name for a company in the beautiful business of French air travel (Avion - the French word for airplane would be a vast improvement). The Toulouse-based company may fortunately change its name if it merges with British BAE Systems (the merger/acquisition rumor of the day). The European monster would surpass Boeing as the largest aircraft company in the world. Smaller BAE rose 12% today on the news they may be bought while Airbus’ parent company dropped 6%.
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