Market Drivers: Uncertainty In Europe, Big News from Dell


Monopoly (Photo credit: compujeramey)

Markets continue to find resistance at the DJIA 14,000 level, after soaring last week on some better than expected economic data. With a light economic calendar this week, we could see focus shift to the looming sequester cuts, the fiscal cliff and the debt ceiling negotiations in a couple of weeks. Here are three market drivers that are impacting the market.

Uncertainty Overseas

With a quiet domestic calendar, investors have once again turned their sights overseas. Early in the week, corruption allegations against Spanish Premier Mariano Rajoy roiled markets, and had the Spanish public calling for his resignation. The latest news came as corruption scandals, affecting several political parties and even the royal household, have rocked the nation during its deep economic crisis, with a recession and an unemployment rate of 26%. We also have renewed political uncertainty in Italy ahead of the country’s elections. As Silvio Peruzzo, an economist at Nomura Holdings Inc., wrote in a note to investors, “The risk of ungovernability remains very high” as “it is increasingly likely that the shape of the government will be decided as a consequence of post-election alliances...This is a recipe for instability and could be a catalyst for uncertainty in the market.”

Takeover News

After long speculation of a private takeover, Dell (DELL) announced that CEO Michael Dell and investment firm Silver Lake Partners will acquire the company in a deal valued at $24.4 billion. The transaction amounts to the largest leveraged buyout since the financial crisis and stands as one of the biggest private equity deals of all time. The massive transaction is anticipated to include $4 billion in equity from Michael Dell, $1 billion in equity from Silver Lake, a $2 billion loan from Microsoft, and the balance in debt.

Technical Levels

With a very quiet week as far as Economic data goes, technical trading levels have become even more important for traders. One level that has been garnering a lot of attention is Dow 14,000. We have not seen this level since October 2007, when the market broke through and got as high as 14,198. If you remember your market history,  following that high, the DJIA proceeded on a 17 month downward slide shedding over 7,000 points on its way to a low of 6469 in April ’09. Hopefully the result will be different this time, but DJIA 14,000 has proven to be a solid resistance point, with stocks pulling back each time a run higher is attempted. A close above this level could be a big positive indicator, and provide a springboard for a strong rally.

Toymaker Hasbro has announced that the iconic favorite Monopoly will be undergoing a change. The newest version of the game will no longer include the “iron” game piece, which is being retired. In an online vote, it has been determined that a cat will be the new replacement. Apparently other pieces that contested for the new spot on Monopoly but fell short included a robot, diamond ring, helicopter and guitar.

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