The E-Mini S&P 500 seems to brush off the pending Greek exit and banking scares coming out of the Euro Zone for the brighter modest US recovery scene. US Initial Jobless Claims dropped 2,000 this week to 370,000 staying within the same monthly range. The last US Unemployment report was at 115,000 new jobs created way under the previous average of 270,000 about three months prior. The Unemployment rate remains steady at 8.1%.
New orders for Advanced Durable Goods increased 0.2% while on the previous March reading, it decreased by 3.7%. This report covers everything from home appliances to large aircraft. Markit, a global survey company reports the US manufacturing Purchasing Managers Index decreased to 53.9 from 56.0 in April. Of course, anything over 50, points to expansion.
In the banking sectors, profits have increased 22.9% from last year, but lending is down. The Federal Deposit Insurance Corp., on a quarterly report, reflected the industry earned $35.3 billion in the first quarter alone. In the first quarter, 16 banks were closed and the problem list declined to 772 from 813. There is an undercurrent of possibly trying to break up the very large banks into smaller banks perhaps to contain potential risks and investigate any activity non-conducive to banking activity. The banking activity as it has expanded into diverse assets has become difficult to regulate with the diverse assets.
Operation Twist is set to end at the end of June. The next policy setting meeting of the Federal Reserve is scheduled for June 19th and 20th. The global investment community awaits the potential further quantitative easing or not! Chairman Ben Bernanke stated on May 10th that "It is very important to say that if no action were to be taken by the fiscal authorities, the size of the fiscal cliff is such that there is, I think, absolutely no chance that the Federal Reserve could or would have any ability whatsoever to offset that effect on the economy." It is believed that he was reflecting on the Euro Zone crisis. He is to testify on the economic outlook on June 7th to the congressional Joint Economic Committee.
The Greek elections take place on June 17th after an inconclusive election of May 6th. So far, according to the polls, 85% of the Greeks want to keep the Euro FX and the rescue funding, but absolutely oppose the austerity measures agreed on by the European Union (EU) and the International Monetary Fund (IMF). The fear is not one smaller economy nation leaving the EU, but the contagion effects on the other countries.
German manufacturing data has been a disappointment. Spain's banking system are suffering from the bad real estate loans. The yields on the 10-year Spanish government debt fell 6 basis points to 6.16%, still at the non-sustainable levels. The yields on the Italian government notes dropped 11 basis points to 5.70%. Christophe Frankel, the European Financial Stability Facility's CFO, asks now for time and patience for the reforms to be put in place and show efficiency.
Iran is still in talks with the European Union Foreign Policy Chief Catherine Ashton who hopes that the nuclear research program is at the beginning of the end! They met in Bagdad on May 23rd to resume negotiations but now will resume talks in Moscow on June 18th - 19th. Iran is hoping to reduce the sanctions placed on it by the US and the EU. The financial constraints have forced Iranian business to be bartered in Gold and Rupees as the Iranian banks have even been banned from SWIFT transactions.
The energies have come down in price as a result of increased production by Saudi Arabia and some global growth slowdowns. The US will not lift any bans until entry to the nuclear research sites are given to the NATO inspectors. Iran still insists that it has the right to make enriched uranium. In response, the US, Russia, China, Britain and Germany have offered fuel to keep Iran's medical isotope reactor running with assistance in their nuclear safety and to end the embargo on civilian aircraft parts. Crude oil demand has been poor with Iran having difficulty with the sanctions as it is. Memorial Day weekend in the US kicks off the driving season which may give a lift to the energy sector. The Middle-East is still vulnerable to conflict until a resolution has been reached.
On the stock side: JP Morgan Chase and Co. (JPM) was down 0.61 % to $34.05. Citigroup Inc. (C) was down 1.69 % to $26.69. Bank of America (BAC) was down 0.42 % to $7.14. Alcoa Inc. (AA) was up 0.35 % to $8.64. Boeing Co. (BA) was down 0.86 % to $70.96. Caterpillar Inc. (CAT) was down 0.94 % to $91.60. General Electric Co. (GE) was up 0.83 % to $19.34. Halliburton Co. (HAL) was down 0.18 % to $31.26. Hewlett Packard Co. (HPQ) was up 3.27 % to $21.97. SPDR Select Sector Fund - Financial (XLF) was up 0.28 % to $14.10.
Today, we have no major US economic reports due out.
E- Mini S&P 500 Chart.
Friday, what to expect: We maintain a bearish bias unless the E-Mini S&P 500 penetrates $1326.50. Today, we anticipate an inside to higher day. Thursday's range was $1323.50 - $1306.00. The market settled at $1322.50. Our comfort zone or point of control for this market is $1314.75. Our anticipated range for Friday's trading is $1332.50 - $1307.50.