The E-Mini S&P 500 trended lower Monday after last week's double-top sealed the near-term fate of the market. The E-Mini S&P 500 is entering "oversold" territory where the selling has slowed somewhat. The contagion fears from the Euro Zone have global consequences as the major nations all seem to have slowed economic growth.
US Factory Orders decreased 0.6% in April pointing to a slump in manufacturing after the 2.1% decrease in March. Friday's US Unemployment set the tone with only a scant 69,000 new jobs created while expectations were for 150,000. The US Unemployment rate increased to 8.2%. The US Gross Domestic Product increased at a 1.9% annual rate while last month's estimate was at 2.2%. US Consumer Spending increased 0.3 % as expected with inflation maintaining 1.9%, which is under the Feds target 2.0%.
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."
He is to testify on the economic outlook on June 7th to the congressional Joint Economic Committee. Economists are speculating with the recent battery of negative data whether the Fed may simply extend "Operation Twist" which is set to expire in June or perhaps introduce another bond purchasing program. Operation Twist was resurrected from the 60's as a program to stimulate the economy and keep interest rates low by buying the long-term instruments and selling the short-term instruments. In an election year, any monetary policy changes later than the June meeting may interfere with the election or be construed as a ploy in the bid for President.
Bristol-Myers Squibb has an experimental drug out to battle cancer through a bolstered immune system. The stock was up 0.4 % to $33.46. US data has been lackluster, but clearly eclipsed by the Euro Zone fight to stay out of recession as the banking system in Europe and the nations falter.
Greece is to have their elections June 17th after the failure to launch a leader on the May 6th elections. Should the vote go to the anti-bailout candidate, Greece will possibly exit the European Union and restart the Drachma. The Greeks will possibly start to really feel the crunch when the insurers pull away and the imports must be paid for before being delivered.
Last year alone, Greece imported about $45.6 billion euros worth of goods. The Greek exports only amount to about $20.2 billion euros worth of products. The European Union (EU) and the International Monetary Fund (IMF) would intervene in the process to attempt a manageable EU exit. The US Dollar had backed off of the highs Monday as investors may be looking for the impact of the Euro Zone crisis running over to the US markets. Investors seemed to flock to German, Japanese, Swiss and Nordic debt instruments. US Treasuries may also have garnished some of the allocations. Surprisingly the Euro Factory prices remained unchanged and the Consumer price inflation decreased to 2.6% in May.
The recent drop in oil prices have contained the inflation fears, but the next OPEC meeting is slated for June 14th, perhaps where the production may decrease from the 10 million barrels a day output to stabilize the oil prices. Greece, Ireland and Portugal are each under the international rescue program but pressure mounts in that it is feared that Spain will require considerable funding with their banking crisis. The EU leaders have asked Spain to release the amount of the bailout required. The finance ministers of the G-7 are to hold 'emergency talks' tomorrow as the saga is nearing its peak.
Spanish banks hold a great deal of bad property debts and need to be recapitalized. One of the major concerns in the Euro Zone banking system is a potential run on the banks. The Spanish debt instruments have hit the non-sustainable levels of 6.6%. June is a vital month for the Euro Zone as well as the US as EU leaders meet in Luxembourg June 21st and Brussels June 28th and 29th. Spain can receive a loan from the European Financial Stability Facility with supervision, but this is the temporary fund set to expire soon.
The European Stability Mechanism is the permanent fund to take over officially in July, but steps must be taken beginning with a request that has yet to be made. Spain had rescued their own fourth largest bank 'Bankia' last month to the tune of about $2.3 billion euros. German Chancellor Angela Merkel is attempting to provide a central authority to manage the Euro Zone finances which is also advocated by the EU and France. The MSCI world equity index decreased 0.4% to 290.81. The Euro Zone awaits to see if more easing is possible to contain the debt crisis.
On the stock side: JP Morgan Chase and Co. (JPM) was down 3.29 % to $30.88. Citigroup Inc. (C) was down 2.80 % to $24.68. Bank of America (BAC) was down 2.07 % to $6.88. Alcoa Inc. (AA) was up 1.08 % to $8.39. Boeing Co. (BA) was up 0.39 % to $67.506. Caterpillar Inc. (CAT) was down 2.64 % to $83.26. General Electric Co. (GE) was down 2.10 % to $18.15. Halliburton Co. (HAL) was down 1.20 % to $29.52. Hewlett Packard Co. (HPQ) was down 0.89 % to $21.06. SPDR Select Sector Fund - Financial (XLF) was down 1.33 % to $13.31.
E- Mini S&P 500 Chart.
Tuesday, what to expect. We maintain a bearish bias unless the E-Mini S&P 500 penetrates $1333.00. Today, we anticipate an inside to lower day. Monday's range was $1281.50 - $1262.00. The market settled at $1273.00. Our comfort zone or point of control for this market is $1273.00. Our anticipated range for today's trading is $1282.50 - $1258.50.