German Court Upholds Euro Stability Mechanism (ESM)

Global markets are higher this morning on the heels of the German court upholding the constitutionality of the ESM bailout fund.  There are still some limitations to the fund, including capping Germany's liability at 190 billion euros, but it still looks good that the ESM will come to fruition.  Elsewhere in Europe rumors swirl that Spain is considering asking for aid from the ECB bond buying program, and that France is urging them to do so.

Asian markets rallied overnight ahead of the German court ruling after Chinese Premier Wen suggested there is room for more stimulus to spur consumption.  Japan led the gains, while China lagged again.

In the US, investors are eagerly anticipating tomorrow's FOMC meeting and whether Bernanke will announce new QE initiatives.  I have been saying I don't think it is likely and that they would prefer to save some bullets, but most strategists expect to hear something and say that is the primary reason that the markets have been rallying - in anticipation of further QE.  So if we don't get anything from the FOMC, the market could be vulnerable.

Also later today we will hear from Apple at their San Francisco event where they will unveil the new iPhone5.  We could also hear about a smaller iPad (7") as well as other software updates.  But the stock has run quite a bit heading into this event, and I could see it taking a breather now that the news is out.

Yesterday Facebook CEO Zuckerberg spoke at a tech conference.  He said a few positive things relative to the stock and their expectations for growth, but nothing earth shattering.  Nonetheless the stock is 5% higher today.  I think investors were just happy to see him in person and hear that he is engaged and taking the drop in the stock price seriously.

The dollar is lower today as the euro gets a bounce from the German court news.  Commodities are mixed with oil slightly higher to $97.30 and gold down just a touch to $1733.  Silver prices are also taking a breather.

The 10-year yield is lifting further to 1.74%.  And the VIX is down 3% back below the 16 level but not giving that much back from Monday's upside reversal.

Trading comment: The S&P is back to making slight new yearly highs today.  So far Monday's selloff looks like a 1-day wonder, but a lot could depend on the FOMC tomorrow.  Many think that if the Fed doesn't announce new QE moves that the stock market could be disappointed and have a correction.  This is certainly possible, but with the stock market making new highs I just don't think that the Fed feels the same pressure to do more QE as it has in past summers.  Financials are leading the early action, which is always a positive sign.  And more growth stocks are continuing to lead the market higher.

KAM Advisors has long positions in AAPL and FB