So, the market bounces off pre-opening lows on the words of Mario Draghi who I consider the world's most reluctant of central bankers.
Draghi has often resembled Gary Cooper's character in 'High Noon' who has skills and wields his weapons only as last resort.
Of course the European Central Bank took no action yesterday and it's really unclear to me what they could do to spark the market or European economy.
"I knew you had guts but I never figured you for brains. It takes a pretty smart man to know when to back away."-Quote High Noon
For the longest time, Draghi pushed on members of the Euro to adopt more fiscal discipline and sacrifices before pushing forward money printing and central bank gimmicks. He finally blinked, but he continued to harp on the fact printing money solves nothing without an onus on sparking the economy through good old fashion hard work and sacrifice. I suppose there's something cute the ECB could pull off that might make the easy money crowd happy, but I don't see much.
"Inflation outlook is significantly lower in 2016"
For now, its jawboning is still an effective weapon for Draghi who hinted at room for action because inflation won't be an issue this year. He didn't say if deflation would be an issue, but let's not quibble.
There is a lesson here for Janet Yellen who must find a way to articulate to the market the Fed isn't locked into four rate hikes, or any rate hikes in 2016, and we need more than a better jobs market to pull the trigger.
Crude Oil Update
You had to like the action in crude oil, which had every reason to collapse after the oil inventory was updated. Maybe it's because the builds, while greater than expected, came in less than the week before. Whatever the reason, crude oil took off just when it appeared ready to stumble again.
Still the chart is very worrisome as each rally attempt has failed to take out a prior high point. Talk about perfect down channels- both WTI and Brent continue to fail to take out the prior session high.
After the close, Schlumberger's posted earnings that came in ahead of the street and announced a $10.0 billion share buyback plan. This is huge considering the company laid off 10,000 workers in the fourth quarter, bringing the 2015 total to 30,000. Management had nothing good to say about crude oil other than to point out the 68% cut in rigs. The world's largest oilfield service provider can ride this out, but the costs are high, including the aforementioned job cuts.
The toll on the oil industry is so intriguing, and yet, the notion crude stays under $30 for an extended period of time flies in the face of logic and economics. There are only so many barrels that can be sold at a loss and roughnecks that can be given their walking papers.
Bottom line is its High Noon.
Today's Session
Oil is up 7% and above $30 and stock markets are off to the races, for now. Global markets are up on talk of coordinated global quantitative easing, including potential for Japan to announce something in the next 72 hours. All this is speculative, but the Nikkei is up about 6%, and according to the Wall Street Journal, Prime Minister Shinzo Abe has stated that "conditions for additional easing have fallen into place."
We have had a lot of earnings, and for the many, the thesis is the same, companies are beating on the bottom line but missing or just in line on the revenue number. Some of the big names that reported include:
- Starbucks (SBUX) - Beat on earnings but missed on revenue. China and Europe were a disappointment.
- General Electric (GE) - Beat on earnings but missed on revenue.
- American Express (AXP) - Beat on earnings and revenue but will cut expenses by $1 billion within the next two years.
- KC Southern (KSU) beats on earnings, but revenue in line.