Peter Cecchini Comments: Wall Street Up On Hopes G20 To Act If Greek Turmoil
June 16, 2012, Reuters
Wall Street was on track to end the week higher on Friday on hopes of collective action from global central bankers if the closely watched election in Greece this weekend results in market turmoil.
The news offset the latest round of weak U.S. economic data, which pointed to sluggish growth domestically.
Officials of the Group of 20 leading industrialized nations told Reuters that central banks of major economies would take steps to stabilize markets and prevent a credit squeeze, if necessary.
That spurred sharp gains late in Thursday's session, erasing the S&P's decline for the week. The benchmark index is now up 0.7 percent on the week, even as uncertainties persist over the euro zone.
But some market participants were skeptical.
"More broadly, we think there is plenty of reason to remain bearish longer term. There is ample empirical support for the notion that banking crises are ordinarily followed by double dip recessions, and the latest recession was caused by no ordinary banking crisis," said Peter Cecchini, global head of institutional equity derivatives at Cantor Fitzgerald in New York.
"Unfortunately, markets and policy makers are so enamored by monetary policy solutions, they've forgotten how things are supposed to work," which should be based on innovation and productivity growth, Cecchini said.
Material .GSPM and energy .GSPE shares were among the biggest gainers of the day, with the two closely tied to economic growth prospects. Cabot Oil & Gas (COG.N) rose 0.9 percent to $35.37 and Alcoa Inc (AA.N) was up 1.4 percent at $8.77.
The Dow Jones industrial average .DJI was up 63.65 points, or 0.50 percent, at 12,715.56. The Standard & Poor's 500 Index .SPX was up 7.49 points, or 0.56 percent, at 1,336.59. The Nasdaq Composite Index .IXIC was up 18.74 points, or 0.66 percent, at 2,855.07.
Despite the gains the market's fear gauge remained elevated.
The CBOE Volatility Index VIX .VIX rose 1.8 percent to 22.07. The VIX typically has an inverse relationship with the S&P 500.
Investors fear the Sunday elections in Greece may set the nation on a path to an exit from the euro zone. That possibility, along with questions about the effectiveness of a bank bailout plan in Spain, has spurred volatility in a thinly traded week.
A gauge of manufacturing in New York state fell sharply in June, though it still showed growth, while a read on consumer sentiment was also below consensus forecasts.
"What's shocking is how disappointing the data is still," said Lawrence Glazer, managing partner at Mayflower Advisors in Boston. "It reflects the general malaise on Main Street right now. Consumers and investors have been hit with a wave of uncertainty."
Recent economic indicators, including Thursday's unexpected rise in jobless claims, have pointed to sluggish growth in the U.S. economy. However, U.S. equities have largely tracked European developments in recent months, and shrugged off weak domestic data on occasion.
Some investors think the lackluster U.S. data increases the chances that the Federal Reserve will signal more easy money to counter slowing growth when it releases its policy statement next Wednesday at the close of a two-day meeting.
The Wall Street Journal reported late Thursday Microsoft Corp (MSFT.O) would buy business software company Yammer Inc for $1.2 billion, citing a person familiar with the matter. Microsoft rose 2.1 percent to $29.96.