Markets Pop After EU Summit, In Spite of Weak Domestic Reports

The markets moved sharply upwards on Friday, with the Dow gaining more than 200 points by midday, on positive news from the European Union’s two-day summit. EU policymakers made a decision to relax repayment conditions for the banks in Spain, which was welcome news given the country had formally requested assistance shortly before the Summit, and they agreed to lower the bar for Italy to receive aid. Officials also proposed the adoption of he Troubled Country Relief Program, or TCRP. The program, which is an offshoot of the EU’s Troubled Asset Relief Program (TARP), would provide a $149 billion economic growth plan for the region.

European markets rose on the news – The FTSE 100 index is up 94.51 (+1.72%) to 5,587.12; the DAX is up 4.0% (-246.54) to 6,396.52; the CAC 40 is at 3,186.41, up 4.43% (+135.05); and, the DOW Global is at 1825.77, up 47.61 (+2.7%) – but the gains were nearly just as large in the US.

The Dow Jones Industrial Average is up 219.22 (+1.74%) at 12,820.26. The S&P 500 is up 25.39 (+1.91%) at 1,354.38. The NASDAQ Composite is up 67.29 (+2.36%) at 2,916.69. In fact, for every stock that went down in price, four went up on the NYSE, even amidst weak reports on the domestic economy.

Reports of personal income and outlays were disappointing across the board. Personal income came in at 0.2%. It remained steady from the prior period’s level but missed analyst estimates of 0.3%. Consumer spending did manage to match consensus estimates, but it was even worse compared to the previous period, which had weighed in at 0.3%. The core price index was 0.1%, which was the same level as the previous period, but it too fell short of analyst predictions of 0.2%.

The Chicago PMI reports came in today as well. Its Business Barometer Index was reported at just 52.9. This level represents a modest increase from the previous period’s level of 52.7 but it too came up short when compared to consensus estimates of 53.1; analyst predictions ranged from 50.0 to 55.1.

Consumer sentiment also disappointed. The Index fell to new 2012 lows after the final June reading measured 73.2. In comparison, the Consumer Sentiment Index weighed in at 74.1 in the previous period. Consensus estimates for the June period were 74.1, on a range of 73.5 to 79.0.