The big overnight news was the massive 8.9 earthquake that hit Japan last night, and the tsunamis that the have been unleashed in the wake of that. There will be short-, medium-, and long-term economic and investment ramifications as a consequence, but to try and sort through all of them immediately is a mistake. In the very short run, folks that are quick on the trigger finger will precipitate price changes, and that may lead to even more price changes and a fair amount of motion. It is probably safe to say that capital will be repatriated to Japan, the damage will be cleaned up, followed by rebuilding, but beyond that it is hard to draw any intelligent conclusions.
I expected to see the U.S. stock market under a decent amount of pressure initially, as I assumed stocks everywhere might be sold in kneejerk fashion, but that really wasn’t the case. New York opened on the flat side and spent the first hour or so trading around unchanged. Apparently, the early strength emboldened the bulls, and by midday the S&P had gained almost 0.5%. After then trending sideways for a couple of hours, the indices climbed again late in the afternoon. By day’s end the market gained 0.75% or so, with the Nasdaq a bit of a laggard.
Away from stocks, the dollar was mixed (ex weakness versus the yen [see below]), Treasuries were flattish, and oil was lower, while silver added 1.5% to gold’s 0.5%.
The big news was the yen. As much as the Bank of Japan wants to see it lower (it was 1.5% higher today), given the massive structural short that appears to be present in the yen, it is going to be an epic tug of war. We are probably about to witness massive money printing and a strong currency precipitated by a huge short squeeze. That currency will have to be watched, as it could have an impact on others (and other markets), depending on how the hurt applied to the yen shorts is transmitted to other assets.