Daily Insight: Europe vs. The Volcano, and SEC Vote

U.S. stocks erased early-session losses after it was learned that the Securities and Exchange Commission’s (SEC) vote on pursuing a case against Goldman Sachs was not unanimous. The vote came in at 3-2, which means the SEC pursuit of the way Goldman has allegedly conducted itself may not be as vigorous as previously expected.

While many will say that it’s GS for the SEC not to pursue the case aggressively, the market also feared the short-term market ramifications of such action. But we shouldn’t put our guard down, as Congress and state attorneys general are there, in all their populist fury, to go after the entire financial industry by way of a new regulatory regime.

I do find it surprising the SEC voted this way, considering the several acts of serious malfeasance they missed over the past couple of years, or decades in terms of Madoff. One would have thought they’d go after this case, maybe even to overdo it, just to make a statement.

The early slide was largely led by basic material shares. China’s pullback on its stimulus, particularly on the loan front as they shift to more stringent credit standards and halt loans to those speculating within the housing market (third home buyers as they call them), has people worried about Asian demand a few months out. China’s very aggressive stimulus program, both in terms of outright government spending and in massive credit creation, has fueled the Asian economic bounce. But the market’s mid-day rally gave life to the commodity trade and basic material shares bounced back.

In the end, all 10 major industry groups close up for the session. Industrials were the laggard, essentially unchanged. Financials, Friday’s big losers, was the best-performing group, up 1.10%.
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Brent Vondera, Senior Analyst
www.acrinv.com