It was a difficult week for investors, because they spent the first three days of it waiting for the last two days to happen. With European leaders traveling to Brussels on Thursday to try to hammer out “the deal that will save the world,” trading swung this way and that on rumors and innuendos. And then, when a deal finally came, it was a little anticlimactic.
On Friday, 26 out of 27 of the countries in the E.U. agreed on the framework for a deal to add 200 billion Euros to an IMF fund and impose strict budget limits. Great Britain took a pass on the agreement, and three of the countries said they need to consult their parliaments. It wuill take months to hammer of the details of the pact, and it could probably still fall apart in whole or in part.
But clearly the deal gave the market some relief. The Dow rose 200 points, and the S&P was up %. In addition, the Chicago Board Options Exchange Market Volatility Index (VIX) fell 14%. Banks rose on the day, with Citigroup (C) up 3.7%.
With so much anxiety about macroeconomic factors roiling the market in recent weeks, it seemed like the market would either soar or plunge on news our of Europe. Instead, the market has made incremental progress in the past few weeks, and appears to be reacting to a gradual consensus in Europe, and more and more evidence of improvements in the U.S. economy. For instance, weekly jobless claims fell to 381000, their lowest level since February, according to a report that came out Thursday.
For the week, the Dow rose 165 points, or 1.4%, to close at 12,184. The S&P rose 10.9 points, or 0.9%, to 1,255.2.� The Dow is up 5.2% this year, but the S&P is down 0.2%.
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