It was all Greece all the time again on Wednesday as sentient improved on overnight chatter Athens was moving toward accepting a third bailout program that was in closer alignment to where its creditors’ demands were.
This was undercut with an announcement from the Greek government that it was urging its voters to vote “No” on the upcoming bailout referendum on July 5. Along with comments from the European establishment that no deal would happen before the vote, intraday gains were trimmed.
But the mood improved into the closing bell after the European Central Bank held its liquidity support of the Greek financial system steady — a positive surprise given the risk they could increase their collateral haircuts, and throw Greek banks into turmoil.
In the end, the Dow Jones Industrial Average gained 0.8%, the S&P 500 gained 0.7%, the Nasdaq gained 0.5%, and the Russell 2000 gained 0.2%.
Crude oil was hit hard, down 4.2% to $56.95 a barrel, after a surprise inventory build in the midst of increasing production — the first increase in nine weeks.
That hit energy stocks hard, pushing the group down 1.3% as a sector. That lifted the ProShares UltraShort Bloomberg Crude Oil (NYSEARCA:SCO) recommended to Edge subscribers to a gain of 14.3% since the beginning of June. Edge Pro subscribers enjoyed a surge in their July $43 puts against Halliburton Company (NYSE:HAL), bringing the total gain to 123% since recommended on June 26.
Airline stocks were hit hard with JetBlue Airways Corporation (NASDAQ:JBLU) down 3.4% and Delta Air Lines, Inc. (NYSE:DAL) down 2.5% after headlines crossed that the Justice Department was looking into potential price collusion.
The allegations are that airlines have been slow to grow in an effort to limit capacity and increase pricing power. If so, that would undercut one of the strongest areas of the market in recent years. The Bloomberg US Airlines Index was pushed to levels not seen since October 2014.
With Greece on hold until Sunday night, all eyes now turn to the June payroll report due early on Thursday ahead of the long Independence Day holiday weekend. Analysts are looking for a strong report, with the consensus estimate featuring a drop in the unemployment rate to 5.4% on the addition of 230,000 payroll positions.
A strong showing will increase expectations the Federal Reserve will raise interest rates in September for the first time since 2006 in an effort to stay in front of nascent wage inflation pressures.
And while the situation in Greece is scary, there is nothing that frightens the bulls as much as the through of a higher cost of capital and the end of the long indulgence of 0% interest rates going back to 2008.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Two- and four-week free trial offers have been extended to InvestorPlace readers.
