The E-Mini S&P 500 remains in a higher range, but yet still has not penetrated the $1266.00 zone. The US reports to recovery, but the potential defaults from the Eurozone still cast a shadow over any further potential gains. US Jobless Claims grew by 15,000 to 381,000, while expectations were for 375,000. The 400,000 marker was still not hit, demonstrating the country is clearly in modest growth mode. The Institute for Supply Management index for Chicago business was at 62.5 this month, close to last month’s 62.6 while expectations were for 61 in December. Anything over 50, points to expansion. US Pending Home Sales Index for November was up 7.3% to 100.1, while expectations were only for a 2% increase.
The first Friday in January, we look forward to the US Unemployment Report with expectations for 150,000 new jobs created in December. November (unrevised) gave us 120,000. The Fed has commented on banks potentially trimming their credit risk on hedge funds, real estate investment trusts and other corporations may be a result of further fears from the Euro debt crisis overlapping into the US banking system.
The US is attempting to circumvent the crisis by using the Financial Stability Oversight Council and the Office of Financial Research to monitor potential risk particularly to banks with assets in the $50 billion plus range. The US Treasury suggests that the banks are billed a flat fee for the service twice a year. The European Central Bank (ECB) issued about $489 billion euros in cheap loans to stimulate bond purchases to aid some of the debt ridden economies. The plan somehow has not been fruitful as the banks are hesitant to loan to each other and deposit the money back into the ECB’s overnight facility for safe-keeping.
Italy’s auction Thursday garnished $7 billion euros in debt with maturities ranging three to ten years. The yields were above the non-sustainable 7% on the ten year. Italy will need to refinance a large sum next year which could potentially turn into another set-back for the Eurozone. The ECB could attempt to keep liquidity in the market, but the funding may simply go full circle back to the central bank. The credit rating facilities such as Standard & Poor’s warned of a possible downgrade to 15 of 17 Euro nations. Most of the possible scenarios imaginable for the Eurozone point to insurmountable debt with little to stabilize the Euro FX.
The austerity measures hamper the growth of the nations making it more difficult to raise the money necessary to trim the debt. It is a delicate balance to make the necessary cuts while stimulating growth. It is possible for the E-Mini S&P 500 to attempt a rally into next week, but will possibly be short-lived with the Euro dilemma. Threats from Iran to block the Strait of Hormuz still linger after the European Unit decided to tighten sanctions on Iran concerning the nuclear program and rumors of a potential bomb. The US has enough military in the region to control any action, but it is worthy to note that Iran has ties with Russia and China. The markets could go into panic mode should any conflict ensue.
On the stock side: JP Morgan Chase and Co. (NYSE:JPM) was up 2.36% to $33.45. Citigroup Inc. (NYSE:C) was up 2.41% to $26.72. Bank of America (NYSE:BAC) was up 3.31% to $5.44. Alcoa Inc. (NYSE:AA) was up 1.29% to $8.63. Boeing Co. (NYSE:BA) was up 1.16% to $74.11. Caterpillar Inc. (NYSE:CAT) was up 1.35% to $90.58. General Electric Co. (NYSE:GE) was up 1.35% to $18.08. Halliburton Co. (NYSE:HAL) was up 1.62% to $33.82. Hewlett Packard Co. (NYSE:HPQ) was up 1.67% to $25.62.
E-Mini S&P 500 Chart
Friday, what to expect: We are technically in 4th day buy mode on the Daily Chart unless the E-Mini S&P 500 penetrates $1208.00. Friday, we anticipate an inside day. Thursday’s range was $1258.50 - $1243.75. The market settled at $1257.50. Our comfort zone or point of control for this market is $1251.75. Our anticipated range for Friday’s trading is $1257.50 - $1244.50. The E-Mini S&P 500 has continually failed to breach the $1266.00 zone, thus potentially it may result in a reversal.