U.S. markets opened lower for the 2nd-straight session following another spike in coronavirus cases and an elevated weekly jobless claims number. News that the governor of Texas has halted the reopening of the economy was also a concern with the surge in cases possibly slowing the recovery nationally.
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The major indexes rebounded midday and were able to hold slight gains into the closing bell as the Financial sector bounced into the green and gave a lift to the overall market. Talk of an easing in Volcker Rule restrictions that would allow banks more flexibility and the elimination of a swaps requirement helped the sector ahead of the bank stress test results that were due after the market closed.
The Russell 2000 rallied 1.7% after settling on the session high of 1,413. Prior and lower resistance at 1,400-1,415 was breached and held with a close above the latter getting 1,425-1,440 back in focus.
The Dow rose 1.2% while testing an afternoon high of 25,769. Prior and lower resistance at 25,750-26,000 was cleared but held with a pop above the latter setting up another push towards 26,250-26,500 the 200-day moving average.
The Nasdaq was up 1.1% with the late day high reaching 10,023. Current and lower resistance at 10,000-10,100 was cleared and held. A move above the latter would signal a retest towards 10,200-10,300 with the recent all-time peak at 10,221
The S&P 500 also added 1.1% following the run to 3,086 just ahead of the final bell. Near-term and lower resistance at 3,075-3,100 was recovered with a close above the latter signaling additional strength towards 3,125-3,150.
Financials and Energy were the strongest sectors after rising 2.7% and 1.9%, respectively, while Technology and Materials advanced 1.3%. Utilities were the only sector laggard after falling 1.2%.
European markets showed strength following better-than-expected economic news out of Germany.
The Belgium20 soared 1.7% while France’s CAC 40 jumped 1%. The Stoxx 600 and Germany’s DAX 30 were higher by 0.7% and UK’s FTSE 100 climbed 0.4%.
Germany’s consumer sentiment index rose to -9.6 heading into July, rebounding from -18.6 the previous month, and beating a forecast for a reading of -12.
Asian markets closed lower in limited trading as Hong Kong’s Hang Seng and China’s Shanghai were closed for a holiday.
Australia’s S&P/ASX 200 tumbled 2.5% and South Korea’s Kospi sank 2.3%. Japan’s Nikkei fell 1.1%.
GDP was unrevised at -5% in the final reading, matching expectations, and compares to -4.8% in the Advance number. Personal consumption was down -6.8% versus -7.6% in the Advance report. Fixed investment was revised up to a -1.3% pace from -2.4% while government consumption was bumped up to 1.1% from 0.8% previously. Inventories subtracted -1.56%, revised down from -0.98%, while net exports added 1.3%, also lowered from 1.5% previously. The GDP chain price index posted a 1.4% rate, as it did in the second look, while the core rate was 1.7% from 1.6% previously.
Durable Goods Orders jumped 15.8% in May, topping forecasts for a rise of 8.5%, and the -18.1% plunge in April. Transportation orders climbed 80.7% after April’s -48.6% drop. Excluding transpiration, orders rebounded 4% from -8.2% previously. Nondefense capital goods orders excluding aircraft climbed 2.3% from -6.5%. Shipments were up 4.4% in May from -18.6% previously. Nondefense capital goods shipments excluding aircraft rose 1.8% from -6.2%. Inventories edged up 0.1% versus the prior unchanged reading.
The advance Goods Trade Deficit widened to -$74.3 billion in May from -$70.7 billion in April. Expectations were at -$68.2 million. Exports fell -5.8% to $90.1 billion after plunging -25.1% to $95.6 billion previously. Imports dropped -1.2% to $164.4 billion following the previous -13.6% decline to $166.3 billion. Wholesale inventories declined -1.2% to $642.2 billion from $64.9 billion, with expectations at 0.1%. Retail inventories dropped -6.1% to $604.5 billion from $643.8 billion, matching forecasts.
Initial Jobless Claims fell 60,000 to 1,480,000 versus forecasts for a print of 1,300,000. The 4-week moving average continued to slip and was at 1,620,750 versus 1,781,500. Continuing claims dropped -767,000 to 19,522,000 after falling -317,000 to 20,289,000 previously.
Kansas City Fed Manufacturing Index for June checked in at 1 versus forecasts of -9.
Atlanta Fed Raphael Bostic believes the economy will recover in the second half of the year but rising infections are a real source of concern. He suspects the country is still in the first wave, but is fearful that a second wave could impact reopenings and force consumers back inside. He said the Fed should remain accommodative until pre-pandemic levels are restored. On inflation, he expects price pressures to remain muted and he does not expect deflation.
Dallas Fed Robert Kaplan believes the economy hit bottom in May. From here, though, he said the fate of the economy is likely in the hands of the virus and healthcare policies. He added the jury is still out, however, whether the U.S. has turned the tide on the coronavirus.
Kaplan expects a -5% contraction rate for the economy this year, with the unemployment ending 2020 in the 8%-10% range. He added targeted fiscal policy likely would be a more powerful now than monetary policy.
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The iShares 20+ Year Treasury Bond ETF (TLT) was up for the 2nd-straight session and for the 6th time in 7 after trading to a morning high of $164.35. Current and lower resistance at $164-$164.50 and the 50-day moving average were cleared but levels that held. A close above the latter would signal additional momemtum towards $165.50-$166.
Rising support is at $163-$162.50 followed by $161.50-$161.
The S&P 500 Volatility Index ($VIX) was down for the 3rd time in 4 sessions despite the opening peak reaching 36.93. Current and lower resistance at 37-37.50 was challenged but held for the 2nd-straight session. A close above the latter would be a slightly bearish signal for the market with additional upside potential towards 40-42.50.
Near-term and upper support at 32.50-32 and the 50-day moving average were breached and held on the late day fade to 32.09. A close below the latter would suggest another pullback towards 30.50-30.
The Wilshire 5000 Composite Index ($WLSH) rebounded after tagging an intraday high of 31,460. Lower resistance at 31,250-31,500 was recovered. A close above the latter would be a slightly bullish signal for a retest towards 31,750-32,000.
Current support is at 31,000-30,750 and the 200-day moving average. A move below the latter would be a renewed bearish signal with backtest potential towards 30,500-30,250 and the 50-day moving average.
RSI is back in a slight uptrend after holding key support at 50 and a level has been holding since early April. A close below 50 would suggest additional weakness towards 45-40. Resistance is at 55-60.
The Real Estate Select Sector Spider (XLRE) snapped a 6-session slide after trading to a 2nd-half high of $34.34. New and lower resistance at $34.25-$34.50 was recovered. A close above the latter would signal retest potential towards $35-$35.25.
Near-term support is at $34-$33.75 and the 50-day moving average. A close below the the latter would be a renewed bearish development with additional downside risk towards $33.25-$33.
RSI has leveled out with key support at 45 holding. A close below this level would signal additional weakness towards 40 and the mid-May low. Resistance is at 50 with a move above this level signaling additional strength towards 55-60.
All the best,