Deterioration in Greece’s talks with creditors was a non-event for U.S. equity investors, who pushed stocks to their best day in a week.
The Standard & Poor’s 500 Index jumped 1 percent and the Nasdaq Composite Index eclipsed a 15-year-old intraday record. All as European Union leaders evinced dwindling hope for an agreement on Greece before its financial lifeline expires.
The reaction is partly a belief the negotiations are stagecraft and partly confidence that whatever happens won’t affect the U.S. economy -- or at least not as much as the Federal Reserve, investors said.
“I don’t think people care,” Robert Sinche, a strategist at Amherst Pierpont Securities LLC in Stamford, Connecticut, said in a phone interview. “In 2010 and 2011, the thought of a Greek exit was viewed as a systemic risk of the whole euro experiment. I think now the Greek exit is viewed just as a Greek problem.”
Investors continued to react to Fed Chair Janet Yellen’s testimony Wednesday and speculated the schedule for interest rate increases had been extended. The U.S. central bank signaled it will raise rates gradually as officials look for more decisive evidence on growth. Data today showed core consumer prices rose less than forecast in May, while fewer Americans than estimated filed for unemployment benefits last week.
“The situation in Greece continues to be the situation in Greece and investors are just looking over their shoulders on that one and willing to step up a little bit,” said Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion.
Euro-area leaders will hold an emergency summit in Brussels on Monday to try and force a settlement on Greece after finance ministers’ efforts failed on Thursday. There’s no chance that the Greek government will receive any financial aid before its euro-area bailout expires and it has to pay the International Monetary Fund about 1.5 billion euros ($1.7 billion) at the end of the month, Eurogroup President Jeroen Dijsselbloem told reporters.
“Investors are under the impression that Europe is going to hem and haw but get something done at the last minute,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates Inc. in Bethlehem, Pennsylvania, said by phone.
“People have been anticipating some negative outcomes along the way,” Schultz said. “Yellen boosted hopes of economic growth going forward, and that set a more positive tone to where things can go from here outside of Greek worries.”
For more, read this QuickTake: Greece's Fiscal Odyssey