Intraday Market Update
In the pre-market the S&P 500 futures were off -14 points to 1,070, erasing the majority of the +16 point rally during the last 30 minutes of trading on Friday afternoon. But the weakness was short lived as the futures found support, trading as high 1,088.75. The S&P 500 is now finding resistance near last Thursday and Friday highs at 1,090. The line in the sand for the bears to defend on SPX is 1,095 (ES mini's 1,094). This is last Thursday's high and also the low on May 7th, the day after the flash crash. Otherwise, the gap lower from Wednesday to Thursday last week could get filled quickly. SPX closed at 1,114.63 last Wednesday while the ES mini's closed at 1,109.75.
April existing home sales handily beat expectations jumping +7.6%, but in a big disappointment supply on the market also jumped +11.5% to 8.4 months. The jump in sales is mostly due to the final impact of the government's first-time homebuyer tax credit which also probably caused prices to firm up in April, gaining +2.1%. However, heavy supply on the market coupled with the absence of government stimulus also means home prices will probably erode in the coming months. Uncertainty in the housing market is a big negative for the overall economy. If the jobs recovery also begins to weaken, foreclosures and distressed sales will cause new trouble in the housing sector. NAR warned investors of a temporary pullback in home sales in the months ahead due to the expiration of the tax credit. I wonder what their definition of temporary is as this crises could go on for years if US companies don't begin to hire in a big way.
Mark Zandi, chief economist at Moody's was quoted on CNBC as saying "It's the best time in our generation to buy. Mortgage rates are so low and with home prices down and lots of inventory, you couldn't pick a better time to buy or re-finance." That may be encouraging to first time home buyers but not so much to existing homeowners. And with lending standards tightening my fear is that there is likely to be better buying opportunities in the future. It is also worth noting that Moody's track record hasn't been too stellar recently.
In Europe, Spain seized troubled regional bank CajaSur, although its worth noting that the bank has been a problem for many years and it only represents 0.6% of the assets in Spain's banking system. Many commentators have pointed out that the press is making more of the event than is warranted, but this is clearly bad for investor sentiment in equity and bond markets. More important may be general strike brewing in Spain as the major unions have been very outspoken towards their government's austerity plans. The EUR/USD is heading south again after its +4% rally late last week.
4-hour chart of the euro:
In equities, Shares of Citi are up +4% after Goldman Sachs upgraded the bank to a buy. With the exception of Citi, most of the other big banks are in the red as the banking sector is one of the worst performers on our core sector list. Campbell Soup reported earnings slightly above expectations and also increased its 2010 guidance. Shares of CPB are about breakeven but well of their lows. Solar name Yingli Green Energy beat earnings estimates and is up +5.50%, however the solar power ETF TAN is off -1%.
Front month crude is higher by +0.50 to $70.37 per barrel. Gold is surging +1.50% higher to 1,193 per ounce and silver is also +1.95% higher. Natural gas is off by almost -1.00% and copper is continuing its rally from Friday trading +2.48% higher.
China was the biggest winner gaining +3.48% on word they were backing away from key property market restraints. Other markets in the Asia-Pacific region were mixed with the exception of Australia which gained +2.09%. Many European markets were closed on Monday.
Core Sector List:
Overall reading: 9 sectors declining, 7 sectors advancing.
Strongest Sectors: Internet, Gold Miners, Biotechnology
Weakest Sectors: Semiconductors, Banks, Oil
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: