The stock market rallied over 200 points on the DOW and 23 points on the S&P today on strong news coming out of Europe that moved the probability needle for Greece defaulting to nearly zero.  George Papandreou abandoned his effort to put a referendum in play that if it passed would have caused chaos in the European financial system by leading to a messy default on Greece’s debt.  This would have quickly lead to a market collapse similar to first quarter of 2009.  The confidence in knowing Greece wasn’t going to default, turned many of the bears to bulls.  I mentioned for the first part of the week that I thought markets were cheap, but needed to go down as they ran up too fast.  That happened in the first two days of this week dropping nearly 5% allowing buyers a entry point.  This on top of Greece being fairly solved were a double shot of adrenaline over the last two days.

Second Stock Market Adrenaline Shot

This morning before the opening bell, the stock market got another great bit of unexpected news when the ECB announced a 25 basis point interest rate decrease!  This should help out some of the debt issues at least slightly knowing they have rates that can go even lower.  This is going to help the destressed companies the same way it did in the US when Bernanke dropped rates to basically zero and they have remained their since.  Hopefully the control of Greece will prevent any European big banks from going under which would be the European version of Lehman Brothers which would be very bad news for the markets.  It has been rumored that names like Deutsche Bank, Credit Suisse, UBS, and So Gen would get hit hard and any of these could be vulnerable as they are highly leveraged to the wrong assets.  Sound familiar to 2008 with banks being overlevered with Mortgage Backed Securities?

Third Stock market Adrenaline Shot

The last great aspect of this week in the stock market has been the great earnings releases.  Actually the whole S&P 500 that has reported has been terrific.  Sure there are the NetFlix‘s and OpenTables which have missed big time, but whole sectors are doing extremely strong.   Two sectors that have been on fire as of late are two that I talk about in my long term theses: Transition from oil to natural gas dependency and internet and mobile phone explosion.  Companies that touch these two areas have been just announcing great quarters with phenomenal outlooks.  EOG reported a fabulous quarter Tuesday after the bell talking about how much oil it was pulling out of these shales when drilling for gas.  Today Chesapeake Energy announced its second in a row fabulous quarter.  The stock jumped nearly 20% in the last couple days.  Core Labs which I have spoken of the best play off the shale explosion in the stock market as it has jumped nearly 35 points since October first!

In the tech arena there are so many great names that I have written about, but my favorite with the least amount of risk is Google!  This company has reported two consequative quarters which sounded like they were running on all cyclinders.  I also love Akamai, F5 NetworksBaidu, and many of the semiconductors like Qualcomm and Cirrus Logic.  There are so many great investment places out there right now, but we have to have the last missing piece of the puzzle tomorrow morning.  If we get a better than expected jobs number like I think it will, the stock market has more upside because valuations will start to mean something again making the stock market cheap!

Cheers,

Vinny

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