The E-Mini S&P 500 trended lower Thursday on additional pessimism as the Euro contagion fears eclipsed the jobs data! Earlier this week the market sold off as the Federal Open Market Committee meeting had expressed little interest in further bond buying as the US economy strengthens. Interest rates are thought to maintain their 0 - .25 % status until late 2014.
The next Federal Open Market Committee meeting is scheduled in June, precisely when "Operation Twist" runs out. Past that time frame we draw too close to elections which makes it unlikely for any significant policy changes. Thursday, US Initial Jobless Claims decreased 6,000 to 357,000, down from the previous 359,000. The report was forecast at 355,000. There is still evidence to point out that further progress is necessary at 7.05 million people still claim the unemployment benefits during that week.
The unseasonable warm weather is thought to be a boost as construction projects pick-up. Manufacturing is thought to remain healthy while private payrolls should continue to advance. The unemployment rate is thought to perhaps dip to 8.2% or remain at 8.3%. The US maintains the modest recovery for the moment, but the Euro Zone contagion fears are back, front and center.
When in doubt, stay out.
Recession fears emanating from Europe still plague the market as the Euro Zone addresses each potential rescue. The "fiscal compact' is set in place via the last major summit, but the economic picture continues to decline. Greece needs to refinance a total of $3.6 billion euros worth of debt instruments in April. The restructuring is to reduce the Greek debt by $100 billion euros. Greece's economy is in deep recession with unemployment at 21%. Bondholders last month took losses of about 74%.
The Greek debt situation is likely to be a long-term endeavor for the Euro leaders. The European Central Bank has already poured about a trillion euros into the Euro banking system to stimulate lending to business and consumer alike in the hopes of invoking further business activity. It is doubtful that any exit strategy will come into play anytime soon. Spain's bond auction generated higher yields again renewing the concerns about the larger economy. They sold $2.6 billion euros of the government bonds which dashed the hopes of recovery any time soon.
The German auction bested the Spanish as $3.37 billion euros worth of government bonds were sold. The T-Bill sale in Portugal was met with better demand. The International Monetary Fund announced that they would be approving ($5.17 billion euros) worth of bailout funds to Portugal to work jointly with the reform budgets. Both the International Monetary Fund and the European Union have a long-term plan in place of $78 billion euros going to Portugal over a three-year span. The International Monetary Fund has further set-up an Extended Fund Facility to make the process funds and make them accessible short notice.
Italy's Prime Minister Mario Monti is proceeding with labor reforms, but is met with protest from union leaders. They believe that the reforms are an infringement of the worker's rights. European Central Bank President Mario Draghi states "downside risks to the economic outlook prevail"! Egypt has requested a $3.2 billion loan from the International Monetary Fund as they are coming out of a time of political turmoil.
Spain is obviously the biggest concern as it is the largest economy. The firewall consisting of the European Financial Stability Facility and the European Stability Mechanism simply may not have the funding necessary for the size of bailout monies necessary for Spain. The European Union has asked that Spain reduce their budget deficit by 2.3 percentage points this year. It is likely that the European Central Bank maintain their accommodative policy stance in light of the recent concerns. Spain does not want to lose their autonomy, so they have not requested any rescue as of yet.
On the stock side: JP Morgan Chase and Co. (JPM) was down 0.18 % to $44.33. Citigroup Inc. (C) was down 0.94 % to $34.71. Bank of America (BAC) was up 0.43 % to $9.24. Alcoa Inc. (AA) was down 1.63 % to $9.65. Boeing Co. (BA) was down 0.11 % to $73.59. Caterpillar Inc. (CAT) was down 0.62 % to $105.60. General Electric Co. (GE) was down 1.37 % to $19.47. Halliburton Co. (HAL) was down 0.39 % to $32.87. Hewlett Packard Co. (HPQ) was down 0.64 % to $23.12. SPDR Select Sector Fund - Financial (XLF) was down 0.38 % to $15.52.
E- Mini S&P 500 Chart.
Friday, what to expect: We maintain a bearish bias unless the E-Mini S&P 500 penetrates $1417.75. Today, we anticipate an inside to higher or outside day. Thursday's range was $1397.75 - $1384.00. The market settled at $1390.25. Our comfort zone or point of control for this market is $1392.50. Our anticipated range for Friday's trading is $1405.50 - $1379.50. Long-term resistance at $1437.00. Anticipated short-term lower trade followed by a couple of spikes this week to attempt to re-establish the bull's control and then a further drop as we approach May. Downside target potential $1371.00 - $1361.00 longer-term.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.