Central banks (finally) took action on Wednesday to stifle the euro crisis by providing cheaper dollar liquidity to starved European banks facing credit crunches.
Reuters reports that the move came as a surprise. The coordinated intervention of central banks include The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve and the Swiss National Bank.
Together their actions "enhance their capacity to provide liquidity support to the global financial system," according to the full announcement from the ECB. Essentially the move makes it easier for the ECB, and thus European banks, to borrow dollars.
"It's not a solution to the euro crisis by any means; it just means that the most acute liquidity problems will be mitigated for now," writes Joe Weisenthal of Business Insider.
The market has rallied around the news. The euro's value as well as European stocks soared. The DJIA is up over 400 points. NASDAQ is up 83 points.
Of course, whenever breaking news leads to rallies, opinions will differ on whether the positive reactions will continue in the long term.
According to one pessimist, PIMCO CEO Mohamed El-Erian, the supply of credit to households and businesses and help[ing] foster economic activity may be a nice goal, but it's not one the banks can achieve with these current measures.
Interested in trading on the idea that stocks will continue to benefit from the news?
To find some ideas, we created a list of S&P 500 stocks seeing bearish short trends, meaning over the last month, short-sellers have increased bets the stock will fall.
These names could have the most to gain from a reverse in the economic trend. If that's the case, short sellers should be prepared for a short squeeze. This is when short-sellers must close out their positions (buying back the stock), causing the stock to rally even higher than before. If you are holding the stock, this is a good event.
Do you think these stocks are about to see a short squeeze? (Click here to access free, interactive tools to analyze these ideas.)
1. CMS Energy
2. Denbury Resources
3. First Solar
5. R.R. Donnelley & Sons
6. TE Connectivity
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Rebecca Lipman owns shares of FSLR. Short data sourced from Yahoo! Finance.
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