Stocks soar on Europe deal and strong holiday sales
What a difference a trading day makes. After U.S. stocks suffered their worst Thanksgiving week performancesince 1942, today investors are cheering a potential new deal out of Europe and strong Black Friday weekend sales. The Dow closed up nearly 300 points.
Let's start with Europe, which has been struggling with a debt crisis for two years. Far from blowing up the common currency, European leaders are currently discussing a fiscal deal that would bring the countries even closer by making budget discipline binding and enforceable. The French budget minister described it "governance with real regulators and real sanctions."
In other words, instead of carrots only, the euro zone leaders are finally adding a few sticks. The hope is that with both carrots and sticks, the European Central Bank might be more interested in acting as the lender of last resort, much in the same way the Federal Reserve did during the financial crisis of 2008.
On top of the news out of Europe, it looks like the American consumer is NOT dead. Black Friday sales were up 6.6 percent over last year, according to ShopperTrak and the National Retail Federation said retail sales for the entire weekend were up over 16 percent, totaling $52 billion, or nearly $400 per person. It should be noted that some are taking issue with these rosy numbers -- see this post by Barry Ritholtz.
Barry is not alone in the buzz-kill category - this morning the Organization for Economic Cooperation and Development (OECD) said "contrary to what was expected earlier this year, the global economy is not out of the woods." The problem continues to be Europe, which the OECD said has fallen into recession. It also warned that the European debt crisis could "massively escalate economic disruption if not addressed." No region was spared, though. The OECD lowered its forecasts for the U.S., now projecting the world's largest economy to grow by 2 percent in 2012, a downgrade from its May projection of 3.1 percent. The report also noted that "emerging economies are still growing at a healthy pace, but their growth rates are also moderating."
Investors shrugged-off the warnings and ended the day with brisk gains:
-- DJIA: 11,523, up 291, or 2.6% (52-week low: 10,604 on 8/9/11)
-- S&P 500: 1192, up 34 or 2.9% (52-week low: 1,101 on 8/9/11)
-- NASDAQ 2,527, up 85, or 3.5% (52-week low: 2,316 on 9/23/10)
