Investor’s first read – Brooksie’s edge before the open
Monday, July 9, 2012 9:09 a.m. ET
S&P 500: 1354.68
Nasdaq Comp.: 2937.33
Russell 2000: 807.14
The three most accurate foreign-exchange forecasters, Wells Fargo, Westpac Banking, and Oversea-Chinese Banking believe the worst is over for the euro this year, however traders don’t think measures taken recently by European leaders at their June 28 – 29 Summit will be enough to head off another crisis.*
Euro-area finance ministers meet today to follow-up on decisions made at the summit. A looming global recession stands to prevent weaker nation’s to “grow out” of their sovereign debt woes.
With a light week for economic reports facing us, the big focus will now be Q2 earnings reports.
While CEO’s have learned to low-ball earnings guidance and analysts the same with forecasts, they won’t make bedtime reading.
Analysts surveyed see a 1.8% decline in S&P 500 Q2 earnings, the first since 2009, though they see growth for 2012 as a whole coming in at a plus 7.2%.*
Is the Street ready for flat-to-down earnings ?
Alcoa (AA) will kick off the season with their report after the close.
CONCLUSION: Critical support at DJIA 12, 450 (S&P 500: 1310) MUST hold to prevent a nasty tumble. Odds favor a drop to DJIA 12,620 (S&P 500: 1330) by Wednesday. Resistance starts at DJIA 12,895 (S&P 500: 1365).
I don’t expect much help from economic reports for several months. Like I said last week, the softness in the economy in recent months has been due to inaccurate seasonal adjusting of indicators, a greater part to the crisis in Europe and an even greater part to the fact the world is climbing out of the greatest recession/financial meltdown since the 1930s.
It takes time to recover, BUT don’t overlook the fact we are already in the third year of that recovery.
My feeling for months is that a meaningful recovery won’t start until the fall, and from lower levels. It’s really up to the BIG money. If they look out into 2013 and like what they see, they will jump the gun and buy. They can’t do that without showing their hand.
Facebook (FB) – has had some buyers. I can’t tell if its short covering or a long-term oriented fund(s) taking a position, trying hard not to alert others that is what they are doing. As a result, support is now $31.30. Resistance is $31.85. I still think it needs to work off the prospective sellers in the low-to-mid 30s, investors who got bagged by the IPO or who bought on a slight pullback from the offering ($38).
ECONOMIC REPORTS: A light week for economic reports.
Consumer Credit (3:00p.m.) – Has been rising but at a slower rate.
NFIB Small Business Optimism Index (7:30a.m.) – Edged 0.1% lower in May to 94.4. While indications are mixed, it would be a surprise if this index lifts until fall.
Wholesale Trade (10:00a.m.) – Slight improvement in the trade gap in April due to a drop in imports as trade gap declined to %50.1 billion from $52.6 billion in March. The gap has been narrowing since early 2010.
FOMC Minutes (2:00p.m.) – The Street will study the minutes for a clue to future Fed policy, especially for the possibility of further economic stimulus.
Jobless Claims (8:30) – Fell 14,000 foe June 30 week to 374,000. The 4-week average stands at 385,750.
Treasury Budget (2:00p.m.) – The Treasury deficit is down 8.9% eight months into government FY vs. a year ago. Receipts are up 5.4%, outlays off a smidge.
Producer Price Index (8:30a.m.) – Dropped 1.0% in May after a drop of 0,2% in April. PPI has beenin a slide since August 2011.
Consumer Sentiment (9:55a.m.) – Index dropped to 72 in final two weeks of June. Now down from a 2011 year-end of 75.
Editor’s Note: I will be on vacation and won’t be able to post to this site on July 13, and between July 16 and July 24. In the event of a market crisis, I may be able to get on the Internet July 23 and July 24.
The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.