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Stocks levitated on light volumes ahead of the ADP report on Thursday and the June jobs report on Friday.
Moody's downgraded Portugal's credit rating around 2 PM NY time, and this took some of the wind out of the market's sails. Nice of them to wait until after the European close to do so. The agencies remain the creatures of Wall Street, and possibly, of US government policy.
This rally is full of air. But try not to get in front of it.
Obama speaks this evening on the efforts of the US to reach a budget agreement that raises revenue in addition to cutting spending before the Treasury exhausts the ability to meet its obligations.
There are those who foolishly desire such a default, as yet another opportunity to loot the real wealth of the nation, and to foment unrest as an occasion to increase their power.
Such is the way to tyranny.
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Until there is reform, there will be no security, no growth, and no peace.
Reuters
Moody's cuts Portugal ratings by 4 notches to junk
Tue Jul 5, 2011 2:11pm EDT
NEW YORK, July 5 (Reuters) - Moody's Investors Service on Tuesday cut Portugal's credit rating by four levels to Ba2, two notches into junk territory, saying there is great risk the country will need a second round of official financing before it can return to capital markets.
Reuters
FOREX-Euro snaps six-day advance as Moody's cuts Portugal
Jul 5, 2011 7:36pm BST
NEW YORK, July 5 (Reuters) - The euro slid against the dollar and the Swiss franc on Tuesday, snapping six straight days of gains, after Moody's cut Portugal's credit rating to junk.
Weak euro zone data and concerns on China had already weighed on risk sentiment and boosted safe-haven currencies. Concerns about Greece have not faded despite the approval of 12 billion-euro loan by euro zone finance ministers, and the Moody's downgrade of Portugal only added to risk aversion.
Moody's Investors Service cut Portugal's credit rating by four levels to Ba2, two notches into junk territory, saying there is great risk the country will need a second round of official financing before it can return to capital markets.
"This renews the question of whether or not just Greece but the other peripherals are likely to need more bailouts," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey. "These issues were not extinguished last week. There was a nice dose of water poured on them, but they are still smoldering, and this is like adding gasoline to those smoldering ashes."
The euro dropped 1.7 percent against the safe-haven Swiss franc EURCHF=EBS to a low of 1.21150, francs, pulling back from a five-week high touched on Monday on trading platform EBS.
The euro was down around 0.8 percent against the dollar at $1.44267 EUR=EBS on EBS, taking a breather from recent gains made after Greece approved tough austerity measures last week. The euro had gained more than 2 percent against the greenback last week in its best weekly performance since January.
On Monday the euro hit a one-month high versus the dollar at $1.45800.
Traders cited talk of stops through $1.44400-$1.44500 ahead of bids $1.44300/$1.44350.
The Portuguese credit ratings cut followed another setback for Greece on Monday when ratings agency Standard & Poor's warned it would treat a rollover of privately held Greek debt, now being discussed, as a selective default.
Greece also needs a second aid package worth some 110 billion euros, which euro zone finance ministers said would be made final by mid-September.
Falls in the euro accelerated after the Markit Eurozone Purchasing Managers' Index showed growth in the euro zone's dominant services sector slowed to its weakest pace since October.
Euro zone retail sales data was also lower than forecast.
One factor capping losses in the euro was Thursday's ECB policy meeting, An ECB rate increase has been well factored in by the market, analysts said.
Price moves post meeting will hinge on the language that ECB President Jean-Claude Trichet uses at his news conference after the formal announcement, with investors focused on what he says about inflation.
"Dropping the reference to 'strong vigilance' would signal a short pause at least in the tightening cycle and likely see the euro rally fade again," said Shaun Osborne, chief currency strategist at TD Securities in Toronto.
Earlier, Chinese media reports about a possible rate rise in China this weekend and a report by rating agency Moody's saying the scale of problem loans to local governments in China may be much bigger than previously thought also hurt risk appetite, lifting the dollar as well.
"We have gathered here to affirm a faith, a faith in a common purpose, a common conviction, a common devotion. Some of us have chosen America as the land of our adoption; the rest have come from those who did the same. For this reason we have some right to consider ourselves a picked group, a group of those who had the courage to break from the past and brave the dangers and the loneliness of a strange land.
What was the object that nerved us, or those who went before us, to this choice? We sought liberty; freedom from oppression, freedom from want, freedom to be ourselves. This we then sought; this we now believe that we are by way of winning.
What do we mean when we say that first of all we seek liberty? I often wonder whether we do not rest our hopes too much upon constitutions, upon laws and upon courts. These are false hopes; believe me, these are false hopes. Liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can even do much to help it. While it lies there it needs no constitution, no law, no court to save it.
And what is this liberty which must lie in the hearts of men and women? It is not the ruthless, the unbridled will; it is not freedom to do as one likes. That is the denial of liberty, and leads straight to its overthrow. A society in which men recognize no check upon their freedom soon becomes a society where freedom is the possession of only a savage few; as we have learned to our sorrow.
What then is the spirit of liberty? I cannot define it; I can only tell you my own faith. The spirit of liberty is the spirit which is not too sure that it is right; the spirit of liberty is the spirit which seeks to understand the mind of other men and women; the spirit of liberty is the spirit which weighs their interests alongside its own without bias; the spirit of liberty remembers that not even a sparrow falls to earth unheeded; the spirit of liberty is the spirit of Him who, near two thousand years ago, taught mankind that lesson it has never learned but never quite forgotten; that there may be a kingdom where the least shall be heard and considered side by side with the greatest.
And now in that spirit, that spirit of an America which has never been, and which may never be; nay, which never will be except as the conscience and courage of Americans create it; yet in the spirit of that America which lies hidden in some form in the aspirations of us all; in the spirit of that America for which our young men are at this moment fighting and dying; in that spirit of liberty and of America I ask you to rise and with me pledge our faith in the glorious destiny of our beloved country.”
Judge Learned Hand, 21 May 1944
With Greece and the end of QE2 under its belts, it was 'risk on' for Wall Street as the VIX plummeted and the safe havens of gold, bonds, and the dollar were shunned by funds eager to squeeze the shorts in the equity markets.
What next? Today was very light volumes with Canada Day and the July 4th holiday weekend, and next week will likely also be light trading, with many North Americans away on holiday.
Let the market come to us. The short term trend reversals look overdone, but they may not be over because they suit the FED and the government quite well.
This *could* be a kind of stealth QE3 - market interventions through third parties and jawboning.
And yet at the same time there has been a 'stunning plunge' in commercial gold shorts.
