EmailFriday marked a fitting end to the third quarter as the major averages suffered sharp losses. Remarkably, the S&P 500, which was up as much as 5.2% for the week at its high last Tuesday, ended the week with a loss of 0.4%.
Unfortunately, what we said last Monday proved to be prescient: "enjoy what the market gives you today, but know that it can still be taken away tomorrow or the next day if leaders fall back on fluff, instead of aggressive action, to placate the market."
Suffice it to say, there was ample talk of aggressive action last week, but there was no actual aggressive action taken.
The German parliament voted in favor of the expanded EFSF, but that was different from a vote in favor of the leveraged EFSF plan that got participants excited last Monday. For good measure, Slovakia, which has an equal-weighted vote in the eurozone that is disproportionate to its economic weight, is causing added angst with a slow-footed approach to approving the EFSF plan that some officials there say is no guarantee.
As it so happens, you can't spell Slovak Republic without b-l-o-c-k. You can spell Slovakia without b-l-o-c-k, though, so hopefully the short form wins out over the long form in the former Czechoslovakia.
Speaking of checks, the troika is in Greece performing its checks on fiscal austerity measures being implemented there. So far, not so good.
Greece indicated over the weekend that it will not meet the deficit targets for 2011 and 2012 it set just a short time ago on account of its recession being deeper than previously thought. This news did not sit well on the continent or in Asia. Major averages in those regions, which were drafting off Wall Street's poor finish on Friday, have fallen between 1% and 4% today.
Things are looking relatively better on Wall Street this morning, but that isn't to say they are looking good. The S&P futures are trading 0.5% below fair value.
If the current indication holds, the S&P 500 will start the week in red figures. We suppose things aren't looking any worse right now for two reasons: (1) the understanding that the first trading day of the month tends to see new/sidelined money put to work and (2) the understanding that the market is testing a key support zone that has held in the past (hence, it is called key support).
The ISM Index (Briefing.com consensus 50.5; prior 50.6) at 10:00 a.m. ET should play a large role in determining the market's direction today.
Recession concerns are prominent right now, so a sub-50 reading in the ISM that is paced by a contraction in the new orders index is likely to play into those concerns. Conversely, a number above 50 in the ISM Index could be enough to ignite some bargain-hunting activity.
And you can't spell bargain-hunting without b-a-r, which is where many participants are likely to go if today goes anything like Friday.
--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.
