The E-Mini S&P 500 trudged higher Wednesday on some positive data and hopeful Euro news. The US (PPI) Producer Price Index released by the Bureau of Labor Statistics decreased by 0.1 % based on reduced food and energy costs.
This is the best report in about a year as factories had increased their production by 0.9% last month. Manufacturing remains the basis of the recovery. There was a 2.7 % decrease in utilities due to the warmer winter weather. Capacity Utilization rate for total industry was up 78.1 % slightly below its average. Homebuilder sentiment was up according to the NAHB/Wells Fargo Housing Market index to 25 from 21 in December. It is thought that the housing market has bottomed and may even wind up contributing to the economic recovery.
So far, the Fed has overlooked any inflation fears and directed their attention to the recovery and job creation as the unemployment rate remains at 8.5%. Earnings have been lackluster to disappointing with Citigroup Inc. (C) reporting profits down Tuesday. On Friday, JP Morgan (JPM) reported a decrease in their investment banking of 56% to $760 million loss in profits. This was down from $1.6 billion in the last quarter. It was the first in three quarters report of more income generated from credit card and card loan business.
Chief Executive Jamie Dimon, sees the credit card loan business as a positive sign for the economy in that it may add more jobs. Goldman Sachs (GS) offered that glimmer of hope as they reported earnings Wednesday of $978 million during the last three months of 2011. The $1.84 per share surpassed the expected $1.24 per share. Goldman Sachs has been able to cut costs and reduce taxes to accommodate the current fiscal environment. We still await Morgan Stanley (MS) and Bank of America (BAC) to really ascertain a clear outlook on the banking sector.
Last month the European Central Bank (ECB) had outlaid about a half trillion euros in cheap three-year loans to banks in the hopes of creating liquidity and boosting the debt sales of some of the indebted countries. At first there were concerns that the money may be hoarded by the banks leaving the debt auctions without demand. So far, one would have to look at the move with optimism. Germany had the best demand for its paper recently than it had in the last six months. Germany sold $3.44 billion euros of bonds. The German government estimates that the German economy will grow 0.1% in the first quarter of 2012. Portuguese 2.5 billion euros of treasury bills were in demand even though Standard & Poor's downgraded the country to junk last week.
Fitch's came out with statements Wednesday creating more positive tones to the marketplace anticipating that Italy should not default, but may suffer a two notch downgrade. The International Monetary Fund (IMF) is expected to increase its funding capabilities to $1 trillion, therefore working to raise $600 billion through new resources. Italy and Britain has sought the aid of the European Union (EU) in the hopes of increasing economic growth and easing some of the austerity measures that have stifled growth.
While the talks and the cohesive steps to contain the Euro debt crisis are positive, there is still a focus on Italy and Spain to retain demand in their debt auctions and Greece to reach an accord to deter any potential default. This market is still vulnerable to many factors. We remain cautiously bullish.
On the stock side: JP Morgan Chase and Co. (JPM) was up 4.70 % to $36.55. Citigroup Inc. (C) was up 2.78 % to $29.00. Bank of America (BAC) was up 5.56 % to $6.84. Alcoa Inc. (AA) was up 2.56 % to $10.01. Boeing Co. (BA) was down 0.33 % to $74.99. Caterpillar Inc. (CAT) was up 1.40 % to $104.35. General Electric Co. (GE) was up 1.49 % to $19.02. Halliburton Co. (HAL) was up 3.13 % to $34.92. Hewlett Packard Co. (HPQ) was up 1.44 % to $26.84. SPDR Select Sector Fund - Financial (XLF) was up 1.53 % to $13.92.
E-Mini S&P 500 Chart
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Thursday, what to expect: We maintain a bullish bias unless the E-Mini S&P 500 penetrates $1279.00. Thursday, we anticipate an inside to higher day. Wednesday's range was $1304.25 - $1286.50. The market settled at $1302.25. Our comfort zone or point of control for this market is $1296.25. Our anticipated potential range for Thursday's trading is $1309.50 - $1282.50.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
