What Will Italy Do Today?

Includes: DIA, QQQ, SPY, USO
by: Wall Street Sector Selector

By John Nyaradi

Major Indices dropped Wednesday on news of continued European and Italian questions.

The Dow (NYSEARCA:DIA), S&P 500 (NYSEARCA:SPY) and the NASDAQ (NASDAQ:QQQ) all dropped over 1% as Italy and Europe continue to scare global investors.

It does not appear that Europe will give us any breathing room coming into the new year, as investors and politicians alike are worried about the alleged 7% yield on the long-term Italian Bond auction scheduled for today. Again we are met with the issue of too much debt, not enough political action, and a wobbling EU economy. I ask the question now: what will Italy do today?

In other news, Oil (NYSEARCA:USO) dropped below $100 per barrel Wednesday as Saudi Arabia and other Gulf Nations promised to provide more oil to the Western world if indeed Iran’s Navy (tries to) shut down the Strait of Hormuz. The Strait of Hormuz is responsible for one third of the world’s oil tanker traffic, and although Iran does not appreciate the possible new sanctions against it, I have a hard time believing that the US Navy’s 5th fleet will allow Iran to disrupt any oil trade. So long as all-out war does not break out, the lines in the sand are drawn and oil prices will likely remain low coming into the new year.

At home the “economic recovery” is slowly but surely moving forward, as retail spending has increased 4.5% from last year, and Tuesday’s manufacturing index report showed improvement. However, Morgan Stanley announced Wednesday that it will be cutting 580 jobs in New York for 2012; Morgan Stanly’s actions are representative of the fact that any US economic recovery signs are still preliminary and young, at best.

Bottom Line: Europe still has to “fix” any of its long term issues on debt, Santa flew north (or south) Wednesday, global markets hinge on what Italy will do today and we are all hopeful for a new and better 2012.

Disclosure: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.