Thursday, November 17, 2011

What did Fitch really say that spooked the market?

Although the U.S. stock market was allegedly "spooked" by a report from Fitch, the report really wasn't that unusual and simply said that if the debt crisis in Europe were to spread to the non-PIIGS European countries, then U.S. banks could be impacted. That's kind of obvious, I think. This was simply yet another instance where traders and short-term speculators reach out and latch on to any piece of news that helps to justify their market bias, regardless of whether it is truly relevant or already priced-in.
 
Specifically, Fitch said:
Eurozone Contagion Threatens Outlook for U.S. Banks
 
Though U.S. banks have manageable direct exposures to the stressed European markets (Greece, Ireland, Italy, Portugal and Spain), further contagion poses a serious risk, according to Fitch Ratings in a new report. Fitch believes that unless the Eurozone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen.
So, in short, no need to get excited. As I've said before, "the fix is in" even if the politicians need to play out an extended drama to satisfy their domestic (and international) critics.
 

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