Flat Market Finish as Greece Fumbles

ETFs and US Markets finished flat today as Greece continued to fumble in forming a coalition government.

US Markets and ETFs finished flat today as investors waited on Greece to form a coalition government in addition to absorbing a series of lackluster economic reports. The SPDR S&P 500 ETF (NYSEARCA:SPY) gained .21%, the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) gained .08%, the PowerShares QQQ Trust Series 1 ETF (NASDAQ:QQQ) lost .20%, and the iShares Russell 2000 Index ETF (NYSEARCA:IWM) gained .38%.  Our friend oil finally turned the painful corner of decline as well, as the United States Oil Fund LP ETF (NYSEARCA:USO) gained .25%.

The latest news from Greece involves newly elected Greek President Karolos Papoulias giving a three-day mandate to former finance minister Evangelos Venizelos of the Socialist PASOK party to form a coalition government in Greece.  If Papoulias fails to form a coalition government, then a new election would take place next month, after which there would be an increased likelihood that Greece would abandon the Euro.  We all know what a Greek exit from the Euro would entail, and the three day clock is ticking.

Spain, at least, vowed to take over 45% of its third largest bank, Bankia; this action at least calmed some investors down for the time being as bond yields dipped below 6% again, although who knows how capable Spain is of propping up its financial system or how long before something goes terribly wrong.

Perhaps more lively economic reports released today would have spurred investors further into the green, however today’s lackluster trade deficit and jobless claims reports proved otherwise.  The US trade deficit expanded 14%, mostly due to an increase in Chinese imports, while the jobless claims report, although reporting a 1000 jobless claim drop this week which is good, this number turned out to be just the same amount of claims as last week, so really no change ocurred.  Dr. Bernanke was also on the news today claiming that US banks were in fact healing; investors did not necessarily rally on those statements either, which could be surprising considering that almost every time the Chairman talks, markets rally.

Bottom Line: Today’s market flatness was likely a simple correction after the last 6 days of Greek-led decline.  With the current news in Greece now fully absorbed into investors’ psyches, we now are waiting for three days to see if Greece can pull together a functioning government.  If not, a new election and possible Greek exit from the Euro is on the horizon, which would naturally bring chaos very close to home.

John Nyaradi is the author of The ETF Investing Premium Newsletter.