Economics, Financial Services, Investments, USA

After 3 consecutive weeks of losses the market opened on Monday, February 2^nd on a strong note gaining 118 points on strong manufacturing index indicating 58.4% growth in January making it the best since August 2004. It was followed by another strong gain of 111 points on Tuesday led by Alcoa, up 2.3% and American Express up 2.1%. On Wednesday DJIA lost 26 points mostly on disappointing earnings for pharmaceutical giant Pfizer. It was followed by a huge sell-off on Thursday down 268 points for the Dow on renewed concerns about global economy and sovereign credit especially Greece. Bank of America was down 5%, Alcoa 4.3% and Exxon Mobile 2.8%. After a small gain of 10 points on Friday the DJIA was down 0.6% for a week. The Euro continued to decline against the US dollar reaching the level of 1.37.

On Monday, February the 8^th the market continued the decline down another 104 points and closing for the first time in 3 months below 10000 for the Dow on concerns about global economy and US interest rates led by Bank of America down 3.5% and American Express 2.8%. On Tuesday market rebounded with a strong gain of 150 based on optimism that Germany will lead other European countries to rescue Greece by offering some kind of loan guarantees. Caterpillar was up 5.4% and Coca Cola- 2.6%. After very quiet Wednesday it was followed by another strong gain of 105 points on Thursday –once again on renewed optimism about the economy. After a small loss of 45 points on Friday the week ended with a gain of 0.8%-first in 5 weeks. US dollar continued its strong advance against the Euro closing below $1.36 for the first time since May 2009.

As usual I will comment on 2 weeks passed. The most important development is continued weakness of the Euro. It is clear that in order to keep Greece afloat Europe has to do something but it is unclear what is going to happen. Greece has the highest in Euro-zone debt-to-GDP ratio of 13%. Germany and France have around 6%. The Greek Government 10-year bonds yield 3-4% more than German with further downgrades likely. But it not the only problem, countries like Portugal, Spain, Ireland and Italy are also in trouble. We will find out soon what Europe is going to do with Greece but regardless it looks like a very bad situation for the Euro. As far as the markets are concerned the correction that I have predicted is on we need an improvement in employment situation in the US for this market to continue to advance.