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Well, that didn't take long. It hasn't even been a week since EU leaders burned the midnight oil to reach a deal that might help Greece manage its debt and remain an EU member. And yet, Greece is already threatening to derail the process by wanting to put the bailout plan to a national referendum.
There aren't many words to describe Greek Prime Minister George Papandreou's decision that don't start with "dumb" or "stupid."
It would seem that Papandreou is trying to solidify his powerbase with some kind of People's Choice award. But the reality could be far different. Members of his party are threatening to defect. And the fact that Greek citizens have been rioting non-stop in opposition to austerity measures makes it hard to believe they will reverse course and vote for austerity now.
This seems like political suicide, and could well end with Greece leaving the EU. The one potential upside — and I'll readily admit that I'm reaching here — is that a negative outcome on the referendum would mean imminent default for Greece. That, in turn, would mean we can get this entire episode behind us sooner rather than later.
The referendum isn’t likely to happen until January, but I can almost guarantee the Euro-banks would start pricing in a 100 percent chance of default in immediately.
Yeah, I know, that's a stretch…
But let's not lose sight of the fact that the EU debt situation is the single biggest negative catalyst for the stock market right now. It may be the only negative catalyst. Remove it and stocks will go higher.
Oil prices started Tuesday below the $90 "line in the sand" but finished the day above it. Even though the U.S. dollar has ramped up hard this week, oil has held above $90. That's a good sign.
Oil is a great indicator of investor sentiment about growth, and it seems to only dip below $90 when investors start worrying about slower growth and the possibility of another recession. So far, the Greek debt situation has not really threatened U.S. growth. So oil can react to a stronger dollar and still remain above $90.
Of course, there are limits to how long any asset can show relative strength while the market is in a sell-off. Eventually, even the best stocks will succumb as investors throw in the towel.
Financials once again led to the downside. Citi (NYSE:C) dropped below $30 a share, and the stock gets interesting down there — $28 is the most obvious support point for Citi. Bank of America (NYSE:BAC) might need to see $6 to get interesting.
The initial reading for jobs growth for October was released this morning. The ADP Payroll report shows 110,000 jobs were added. That's a little better than expected. But remember, the ADP report doesn't include government jobs. And since government has been steadily shedding payroll, the Nonfarm Payroll number this Friday will likely be lower. Current estimates average 85,000.
Perhaps even better than the ADP Payroll report was the Challenger survey that seeks to measure planned layoffs. The number of planned payoffs fell dramatically in October, down 63 percent to 43,000.
Needless to say, some good news about employment is way overdue. We're not likely to see a big blowout for Nonfarm payrolls this week. But I'll wager that we see a pretty good number in November or December. I believe retail sales will be stronger than expected for the holidays, and that companies will hire more than expected to meet the demand.