The market collapsed lower today as the new ECB chief Mario Draghi told markets he would not save the day. Expectations had been high for the ECB to come in and buy bonds from Italy and other stressed nations. It was clear in the short term, the ECB will not do this. The markets fell on this news with the Dow Jones Industrial Average dropping over 100 points on the day. The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) is trading at $120.84, -1.18 (-0.97%) .
In reality, the fact that Draghi said he would not buy EU debt should be no surprise. Think about it this way. If these nations in the EU are going to be responsible going forward, he cannot go and bail everyone out. That would be a U.S. Federal Reserve move. Instead, they must sweat a little and get their own house in order. The PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) is trading at $56.71, -0.37 (-0.65%).
The shock to the market is more so a fear that the new ECB head is hawkish and hardcore like the old ECB chief Jean-Claude Trichet. When Mario Draghi took over the post, many thought he was going to be a Ben Bernanke clone. This would mean he would bail out everyone just like the Federal Reserve did in 2008. This is obviously not the case, at least in the short run. As of now the stock market is adjusting to this new realization. The Dollar is jumping on this new found fear. The PowerShares DB US Dollar Index Bullish (NYSE:UUP) is trading at $22.19, +0.12 (+0.54%).
Gold and silver are both dropping sharply as the Dollar surges as well. The SPDR Gold Trust (ETF) (NYSE:GLD) is trading at $166.45, -2.89 (-1.71%). The iShares Silver Trust (ETF) (NYSE:SLV) is trading at $30.78, -0.82 (-2.59%).