.

SmartMoney Blogs

Real-Time Advice
Our real-time advice on how market shifts and news impact you and your money

U.S. Stocks Fall on Euro News – But Not For Long?

Bad news out of Europe was once again dragging down the shares of American companies today. But some investing experts suggest the U.S. stock market may be breaking out of its euro-crisis spell.

Getty Images

Although the Dow dropped nearly 400 points today — sparked by a sharp rise in Italian bond yields which left investors worried Italy may need a bailout — there have been signs the U.S. stock market is starting to “decouple,” or move independently from European markets, according to Ed Yardeni, the president and chief investment strategist of Yardeni Research. Last week, “the bad news out of Europe tended to stay in Europe more so than in the past,” Yardeni wrote in a note to investors on Monday. While the MSCI Europe index fell 4%, and indexes in Germany, France and Italy were down 6 and 7%, the S&P 500 was only down 2.5% for the week, and the MSCI Emerging Markets index was nearly flat.

Indeed, some investors see today’s drop as a buying opportunity. Jack Reutemann, the founder and CEO of Research Financial Strategies, points out that what’s currently happening in the markets has “nothing to do with U.S. economic reality, nothing to do with the health of U.S. corporations, and nothing to do with the profits of U.S. corporations.” Third-quarter earnings were strong, and U.S. companies have cut costs, owe very little debt, and are paying attractive dividends, Reutemann says. “Every one of these down days is a buying opportunity for smart investors,” he says. “Over the next two months there could be some issues, but long term there’s nothing better than the U.S. stock market right now,” he says.

But a more pronounced break from Europe may, however, require some kind of resolution to the slow-motion crisis playing in Europe, says Tom Samuels, the managing partner of Palantir Capital. The crisis could also end in a real blow-up, if Germany decides they can’t bail out the entire continent, or citizens of one of the heavily indebted countries firmly rejects the bailout plans, Samuels notes.

To prepare, Samuels recommends developing a short list of great U.S. companies you’d like to buy, and being prepared to snap up shares if a worst-case scenario for Europe makes markets tumble sharply. That list should include “global franchise names” based in the U.S. like Coca-Cola (KO) , Johnson & Johnson (JNJ), Exxon (XOM), or Wal-Mart (WMT), companies that have positive cash flow and don’t need to borrow money to fund their operations, Samuels says.

Comments

We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (3 of 3)

View all Comments »
    • I think there’s a significant. getenic component that influences the beliefs, behaviors and world views of people, including this sort of thing. Brains/biochemistry actually work differently. Not solely getenic, of course, but more significant than is commonly recognized. Not just environment, good/bad childhood experiences, parents, community etc. I read some good research addressing this question, but can’t remember the source. Just like there is a getenic component to the tendency to be a happy-pants Tigger type, or worried Eeyore type. I think we all appear quite similar in looks, like all dogs look like dogs, but they vary widely in small but significant ways in getenics, personality, intelligence, tendencies: think poodle vs pitbull vs .

    • I just really hoped that it is true that U.S. stock market is breaking out this euro-crisis spell….

      Another thing, Samuels’ list i think is very interesting and something to consider for those who are interested in investing!

      Very informative!!

      Crumblrr.com

    • Not so fast my friend – They failed to mentioned the pending negative impact on the market’s confidence when the Debt Comission fails in their task.

About Real-Time Advice

  • How breaking news — in the markets, Washington, and around the world — affects you and your money. Have a question about how current events may change your financial future? Email us at ask@smartmoney.com.

.