EmailRetailers were relishing "Mega Monday" while stock market participants were left to lament "Terrible Tuesday."
Tuesday wasn't terrible in terms of losses or anything like that. It was terrible simply because the stock market was essentially closed even though it was open for a full day of trading.
The only meaningful takeaway from Tuesday's session perhaps was that it underscored why the NYSE might want to think about instituting half days in the week following Christmas.
A total of 495 mln shares changed hands at the NYSE, below a recent average of 944 mln shares and just a smidgen above the 434 mln shares that were traded last Friday. Through the twists and turns of six-and-a-half hours of scintillating non-action, the S&P 500 closed the day up exactly 0.1 points or 0.01%.
The thin trading conditions were attributed naturally to the holiday season, although an impending debt auction in Italy also garnered attention as a factor weighing on investor interest.
The good news is that the auction went relatively well. Italy managed to sell EUR 9 bln of 6-month bills at an average yield of 3.25%, down sharply from 6.50% at the prior auction in November. The bid-to-cover was 1.69 compared to 1.50 at the November auction.
Italy also managed to sell EUR 1.7 bln of 2-year debt at an average yield of 4.85% versus 7.81% in November.
This success has relieved some of the pressure in the secondary market for Italian bonds, as the yield on Italy's 10-year note has dipped to 6.75% this morning from 7.00% yesterday. Reports indicate Italy will return on Thursday to sell up to EUR 8.5 bln of longer-term bonds that includes three-year and ten-year offerings.
The success of today's auction has been attached to the impact of the ECB's recent 3-year long-term refinancing operation. An interesting cross-current there, however, is that there is a Bloomberg.com article this morning reporting that overnight deposits at the ECB reached a record high EUR 452 bln, suggesting banks are opting to park excess cash rather than to deploy it. That could be a seasonal thing -- or not.
There had been some hope that banks would use the added liquidity to buy eurozone debt -- Italy's and Spain's in particular -- in an effort to hold down borrowing rates, but the jury is still out as to whether that will be the case.
That will be an overarching concern heading into the new year. For now anyway, the market appears content to see that today's auction went well no matter who did the buying.
The S&P futures are three points above fair value, which has the cash market on track for a modestly higher open. After that, well, it could be a woeful Wednesday of participation.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
