Stocks Gain Slightly as Greece Technically Defaults
NEW YORK (TheStreet) -- Stocks closed fractionally higher Friday after a paring gains late afternoon when Greece was declared to be in a default because it had forced some private investors to participate in its restructuring efforts.
The International Swaps and Derivatives Association said that the debt swap Greece wrapped up Thursday afternoon constituted a "credit event," meaning that payouts of credit default swaps would be triggered. The financial industry group explained that the country essentially was defaulting on its debt because of the inclusion of collative action clauses in the restructuring agreement.
While the ISDA's announcement was by in large expected by traders, stocks still took a hit on the news. Tens of billions of dollars in credit default swaps are now expected to be paid out between banks and hedge funds.The collective action clauses were included in the agreement in order to have all private investors take a write down on their holdings of Greek debt. As a result, Greece was able to clear a targeted participation rate of 75% for its €206 billion debt restructuring deal, also history's biggest sovereign debt restructuring. With this roadblock out of the way, Eurozone finance ministers are expected to decide whether the swap was successful enough to award Greece its second bailout package. Helping to the upside was the government's nonfarm payrolls report today. Data showed continued hiring growth, albeit at a slightly slower pace of 227,000 in February compared with an upwardly revised increase of 284,000 the preceding month. Economists surveyed by Thomson Reuters were expecting growth of 210,000 for February. The change in December was also upwardly revised, to 223,000. It was the first time since early last year that payrolls have increased more than 200,000 three months in a row. Economists agreed that the report, while not a game changer, was encouraging. The unemployment rate stayed at 8.3% last month, although a broader measure of the rate that includes discouraged workers, ticked lower. "This is a very strong report," said Eric Green, chief economist at TD Securities. Still, it's "clearly not enough to force the Fed toward being meaningfully more hawkish. Job growth on a sustained basis at 275,000 is needed to achieve that." International trade numbers released in the morning help keep a cap on the day's stock gains. The Department of Commerce said that the U.S. trade deficit widened more than expected to $52.57 billion in January, its highest level in more than three years, after deepening to $50.42 billion in December. Economists had expected the trade deficit to widen to $49 billion in January. Previously, it was reported that the trade deficit was $48.8 billion in December. In other economic news, the Commerce Department reported that wholesale inventories for January rose 0.4% compared to an upwardly-revised 1.1% increase in December. Economists were expecting a rise of 0.6% in January.
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