Intraday Market Update
The German move to ban naked short selling of euro-denominated government bonds and 10 leading financial institutions has added to risk aversion by investors. German Chancellor Angela Merkel said in a speech to parliament that the euro was in danger and urged speedy action to stop market extortion. She went on to say that the European Union needs a process for orderly insolvency measures for its members.
Worries about the global economic recovery continues to be at front and center stage and the lack of investor confidence has put pressure on equity markets throughout the world. US companies that rely on overseas revenue have been especially hit hard as the US dollar continues to strengthen. Shares of Caterpillar and Boeing are down about -3% and United Technologies is down about -2%, all putting pressure on DJIA.
The S&P 500 hit a low of about 1,100 in early trading and briefly pierced through it s 200-day SMA before finding support and bouncing sharply to the upside. The index is now trading about +12 points off of its lows but is still down -8 points on the day. The Russell 2000 is leading the declines and is down -1.30% compared to the other major indexes which are off by about -0.75%.
In economic news, there is no signs of inflation as the overall Consumer Price Index dipped -0.1% in April after edging up +0.1% in March. Estimates were calling for a relatively flat reading. Consumer prices remain extremely low which gives the Federal Reserve plenty of room to continue their quantitative easing measures, or at least maintain its large balance sheet keeping liquidity in the economy. The bond and equity markets should like the fact that the Fed is not in any hurry to tighten their policies.
The Mortgage Bankers Association Purchase Application Index plunged -27.1% last week on top of the -9.5% plunge the prior week. This is the lowest reading since 1997. Obviously the expiration of government stimulus on April 30th pulled sales into March and April at the expense of May. These results point to weak home sales in May and additional pressure on home prices. New risks for the housing sector are now alive and well.
In equities, Hewlett Packard raised its 2010 guidance and beat expectations on solid demand for PC's and servers, and a resurgence in its printing business. Shares of HPQ are up +0.80%. Deere reported a quarterly profit that beat expectations, buoyed by a recovery in demand for its construction equipment, and also raised its 2010 outlook. Shares of DE are higher by +3.68%. Discount retailers Target and BJ's Wholesale Club posted also posted higher than expected quarterly earnings. Shares of TGT are about break-even while BJ are higher by +4.3%.
General Electric, a new long play our Premier Investor newsletter, caught a bid after the company disclosed on its Web site that it expects to see earnings grow in Q2 and that it will resume buying back shares at the end of this year. GE said it sees the price of its shares attractive below $22.00. GE is trading at about break-even near $17.25 per share.
Commodities remain under pressure with the precious metals taking a big hit. Gold is down more than -2% to 1,189 per ounce, while silver is off by -3.8%. Front month crude is down slightly to $72.50 per barrel (-0.25%). Copper is off by -1.6% and natural gas is down by more than -4%, giving back all of it gains from the past week.
All major markets throughout the world were lower on Wednesday, especially in Europe. Notable losers in the Asia-Pacific region were Australia (-1.87%), Hong Kong (-1.83%), Japan (-0.54%) and China (-0.27%). Notable losers in Europe were Germany (-2.72%), London (-2.81%), France (-2.92%) and Italy (-3.25%)
Core Sector List:
Overall reading: All 12 sectors declining, 3 sectors advancing.
Weakest Sectors: Gold Miners, Internet, Oil Services
Strongest Sectors: Semiconductors, Broker Dealers, Pharmaceuticals
S&P 500 - Daily and 30-minute Intraday Charts:
Dow Jones - Daily and 30-minute Intraday Charts:
NASDAQ - Daily and 30-minute Intraday Charts:
Russell 2000 - Daily and 30-minute Intraday Charts: