Traders were relieved when the head of the European Central Bank (ECB) proclaimed, "The ECB is ready to do whatever it takes to preserve the euro." Stocks and the euro jumped on the news. Rallies based on hopes of monetary easing can be volatile but profitable for traders. They are also usually short-lived unless actions follow words.
S&P 500 Rises on Hope
Earning disappointments were in the news as market leaders like Apple (NASDAQ: AAPL), Starbucks (NASDAQ: SBUX) and Facebook (NASDAQ: FB) missed analysts' estimates. While these stocks dropped, the broad market rallied. SPDR S&P 500 (NYSE: SPY) gained 1.62% on the week, and Vanguard MSCI Europe ETF (NYSE: VGK) was up 3.29%. The rally from Tuesday's lows was even more impressive as SPY closed the week 4.25% above the low and VGK was 8.1% higher.
Bears can point to a number of reasons that the market should fall -- bad earnings, slow revenue growth, possible inflationary pressures as a result of central bank easing. The fundamentals certainly still point to weakness, but the market action is the most important information that traders act upon, and the market was up. The question traders now face is whether the gains will continue. (more)
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