The E-Mini S&P 500 was pressured early on in the session as ISM data showed contraction for the first time in three years. The US Institute for Supply Management index of national factory activity dropped to 49.7 from the previous reading of 53.5. Expectations were for 52.0. The drop below 50.0 points to contraction for factory activity. The future new order portion of the report dropped to 47.8 from 60.1 in May.
US exports dropped to 47.5 in June from the May 53.5. The employment portion of the report dropped to 56.6 in June from the previous 56.9. US Construction Spending increased 0.9% to the annual rate of $830 billion. US Thomson Reuters/PayNet Small Business Lending Index increased to 108.4 in May from 96.6 in April. US CoreLogic's home price index increased 1.8% in May.
The next US Federal Open Market Committee meeting is slated for July 31st through August 1st. Monday's doom and gloom only fueled thoughts that the "fiscal cliff" may be closer than we know leading to potential easing. At the last Federal Open Market Committee meeting, Operation Twist was extended to the end of the year with an added $267 billion added in bond purchases. The market was disappointed with the move still hoping for a QE3.
The central bank has purchased $2.3 trillion in government debt to keep borrowing costs down and stimulate the economy. The Fed has spoken of a potential "fiscal cliff" with the intention of heading it off. The upcoming meeting may breach this cliff with further plans or the extension in place. Any moves closer toward election may be difficult. The US Unemployment rate stands at 8.2 % with three months of lackluster jobs creation.
This week is paramount with the 4th of July on Wednesday, the US Initial Jobless Claims and US ADP private sector jobs reports on Thursday, while Friday is the US Unemployment report. The forecast on the ADP private sector jobs report is at +102,000 down from the previous +133,000. The forecast for the US Initial Jobless Claims is 385,000 down from the previous 386,000. The US Unemployment report is forecast at +90,000 up from the previous +69,000.
Eurostat, the European Union's database of statistics has an Unemployment rate of 11.1%. Markit's Euro Zone Purchasing Managers survey was at 45.1 in June unchanged. Any number under 50 points to contraction. Manufacturing in the US, Euro Zone, China and Brazil all contracted last month.
The JPMorgan Global Manufacturing PMI contracted to 48.9 in June from 50.6 in May. Again, anything under 50 points to contraction. French, Italian and Spanish car sales plummeted in June while German car sales are somewhat flat. The Markit/CIPS PMI increased to 48.6 in June up from the 45.9 in May but still under 50 pointing to contraction. Spain sold ten-year bonds at 6.3% down from the 7.00% non-sustainable levels and the Italian debt yields dropped to 5.74%.
Spain will further auction about $2.5 billion euros of varied bond maturities on Thursday. Spain is under pressure to raise $33.3 billion euros at twelve upcoming auctions this year. The Treasury of Spain has raised about 61% of its target to date. The summit of last week had little in expectations but has made vital steps viable to tackle the crisis. The rescue fund's may deposit money directly into the debt stricken banks, may support the bond sales and the EU has acted toward a banking union by promising to create one banking supervisory party to monitor and regulate the banking system. The next European Central Bank meeting on July 5th where another interest rate cut is anticipated by many.
On the stock side: JP Morgan Chase and Co. (JPM) was up 1.54 % to $36.28. Citigroup Inc. (C) was up 0.18 % to $27.46. Bank of America (BAC) was down 1.59 % to $8.05. Alcoa Inc. (AA) was down 1.43 % to $8.63. Boeing Co. (BA) was down 1.51 % to $73.18. Caterpillar Inc. (CAT) was down 1.45 % to $83.68. General Electric Co. (GE) was down 1.68 % to $20.49. Halliburton Co. (HAL) was up 0.74 % to $28.60. Hewlett Packard Co. (HPQ) was up 0.25 % to $20.16. SPDR Select Sector Fund - Financial (XLF) was up 0.61 % to $14.72.
E- Mini S&P 500 Chart.
(click to enlarge)
Tuesday, what to expect: We maintain a bullish bias unless the (September) E-Mini S&P 500 penetrates $1313.50. Tuesday, we anticipate an inside to higher day. Monday's range was $1362.25 - $1349.50. The market settled at $1357.50. Our comfort zone or point of control for this market is $1355.25. Our anticipated potential range for today's trading is $1373.50 - $1349.50.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
