The E-Mini S&P 500 traded in a 15¼ point range Tuesday as US economic reports fell short of expectations. US Consumer Confidence fell to 61.1 from 64.8 the preceding month. Expectations were for a reading of 67 - 68. Sentiment could have been affected by the weak job market. It seems that the market is preparing for the US Unemployment due out this Friday. The forecast is for a drop from the 200,000 new non-farm jobs in December to a potential 150,000 new non-farm jobs in January.
The ADP private sector jobs due out today is forecast to decrease to 185,000 in January from 325,000 in December. Wages and salaries for civilian workers rose 0.4% and benefit costs rose 0.6%, seasonally adjusted, from September to December 2011. Over the year, compensation rose 2.0%, wages and salaries 1.4%, and benefits 3.2%.
Chicago PMI dropped to 60.2 while forecasts called for 63, again possibly affected by a weaker labor market. Today's ISM Manufacturing Index is forecast at 54.5, up from the previous 53.9. Construction Spending is forecast at 0.4%, while the prior reading was for 1.2%. Of the 204 S&P 500 companies reporting earnings, 59.8 have beaten expectations. Exxon Mobil Corp. (XOM) earnings were slightly higher than expectations, but still succumbed to some disappointment causing its shares to fall 1.9%.
Greece is still trying to strike a deal with private sector bondholders with the swap to restructure $200 billion euros of debt and the bailout ! Negotiations between Greece and private creditors have not reached an accord. Once they have, the troika of foreign lenders are to submit a report of the progress in Greece, then perhaps the $130 billion euro bailout may be dispersed.
The European Union (EU), International Monetary Fund (IMF) and the European Central Bank (ECB) are in Athens discussing a supplementary budget to reach the financial goals for 2012 in Greece. Germany is trying to persuade Greece to allow the management of its budget policy to fall into the European institutions. This step has met tremendous resistance from Greece even with Germany trying to dilute the potential shift of control. It is up to Greece to convince the troika - made up of the European Union , the European Central Bank and the International Monetary Fund , that it can adhere to strict austerity measures to increase budget cuts and to increase taxes to increase revenue.
The people of Greece, of course, protest the measures as the unemployment rate is high and the standard of living has little flexibility at the poverty levels. It is thought that the fiscal compact now in place for the Eurozone countries, consisting of tighter budget rules, a larger bailout fund and the commitment to structural reforms may help contain the debt crisis and slowly raise the indebted Eurozone out of the crisis. Expectations are that Portugal may seek a second bailout from the European Union and the International Monetary Fund on top of the $78 billion euros in bailout money already received.
Standard & Poor's downgraded Portugal to the 'junk' category and it is thought that they may be next in line for restructuring. Today, Portugal will issue possibly up to $1.5 billion euros of 3 - 6 month Treasury Bills. While Portugal has not the extensive debt problems of Greece, the fears still remain that they may follow, again confirming a possible domino effect. There were rumors also about the US, EU and the IMF possibly gathering about $1.5 trillion euros in rescue money for the Eurozone countries.
This has not been confirmed as the US has remained sidelined for most of the crisis. While the E-Mini S&P 500 has had a good run up, it is vulnerable now to the potential disenchanting US economic data due out this week as well as the possible events from the Eurozone. The resilience of this market should keep the bears cautious and the bulls waiting for the next support.
On the stock side: JP Morgan Chase and Co. (JPM) was up 0.24 % to $37.10. Citigroup Inc. (C) was up 1.49 % to $30.57. Bank of America (BAC) was up 0.71 % to $7.12. Alcoa Inc. (AA) was down 1.94 % to $10.12. Boeing Co. (BA) was down 0.20 % to $74.01. Caterpillar Inc. (CAT) was down 1.18 % to $109.11. General Electric Co. (GE) was down 0.71 % to $18.77. Halliburton Co. (HAL) was down 0.22 % to $36.59. Hewlett Packard Co. (HPQ) was down 1.11 % to $27.57. SPDR Select Sector Fund - Financial (XLF) was up 0.14 % to $14.02.
E-Mini S&P 500 Chart.
click to enlarge
Wednesday, what to expect: We maintain a bearish bias unless the E-Mini S&P 500 penetrates $1329.00. Today we anticipate an inside to higher day. Tuesday's range was $1317.50 - $1302.25. The market settled at $1308.00. Our comfort zone or point of control for this market is $1309.50. Our anticipated potential range for Wednesday's trading is $1321.50 - $1301.50.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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