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Stock futures mixed

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Stock futures are mixed this morning with S&P futures (SP01U) trading down 1 point, NASDAQ futures (ND01U) are trading up 2 points and Dow futures (DJ01U) are down 32 points. Fair value for the S&P 500 for today is $7.22. Computers are set for program buying at $8.81 and set for selling at $5.43. Fair value for the NASDAQ-100 today is $15.22.

Bond YIELDS edging higher

Bond YIELDS we watch on a daily basis are all marginally in the green this morning and this indicates that there is slight selling in the bond market this morning. One level we feel is key to be watching is the 5.06% YIELD level on the 5-year Treasury ($FVX.X). This 5.06% YIELD level has not been violated to the upside, since it was broken to the downside on December 20, 2000. If we were to see this bond YIELD get above this level, it would give hint that market participants are perhaps starting to view this risk/reward relationship between bonds differently. For months, cash had been flowing into bonds (driving YIELD lower) as the market sought out the safety of Treasuries. Equity bulls want to see the market continue selling bonds like we've seen take place in the last four trading sessions and indicate to us that there truly is a shift from bonds to stocks taking place. We feel the 5-year YIELD above 5.06% would be one sign that this is taking place on a meaningful basis.

Minnesota Mining & Manufacturing "3M" will weight on Dow

This morning's lowered guidance from 3M (MMM) wild undoubtedly have a negative effect on the Dow Industrials (INDU) this morning after the company lowered guidance. MMM said it expects lower second-quarter earnings do to weakness in the U.S. economy, an increase in slowdown in European and Asia Pacific economies, and a continuing negative impact from the strong U.S. dollar. The company estimates earnings for the second quarter to be in the $1.10-$1.14 per share range, while analysts polled by Thomson Financial/First Call had expected $1.19.

Jeff Bailey
Senior Market Technician

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