Market Recap Jul 2, 2015

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Usually a market day post employment report is very volatile but most traders Thursday seemed to sit on their hands as they awaited the outcome of this weekend’s Greek vote. After opening with a mild gap up, indexes sold off and ended the day with small losses. The S&P 500 fell 0.03% and the NASDAQ 0.08%. The markets will be closed Friday for the holiday.

Greek Prime Minister Alexis Tsipras said in a Dow Jones report the leaders will have a deal 48 hours after the referendum. A survey showed 47 percent leaned toward a “yes” vote on the referendum, an endorsement of austerity and the international bailout. The “no” camp, the government’s position rejecting those terms, was 43 percent. The margin of error in the survey of 1,000 people was 3.1 percentage points. The Greek stock exchange and local banks remained closed for a fourth day in a row on Thursday. Talks between Greece and its international lenders are now postponed until after Sunday’s referendum on the country’s bailout terms.

On first glance the unemployment rate looks great but it was due to a lot of workers leaving the workforce – which is a bad reason. This has been the pattern post Great Recession – tons of people disappearing from the workforce pushing the unemployment rate down. There were also 2 negative revisions downward of prior reports.

American companies kicked off the summer with modest growth in hiring, sending nonfarm payrolls up 223,000 in June, according to Labor Department numbers released Thursday. In addition to the payroll growth, the unemployment rate ticked lower to 5.3 percent from 5.5 percent, due largely to a sharp decline in labor force participation, which fell from 62.9 percent to 62.6 percent, its lowest level since October 1977. 432,000 people dropped out of the labor force. Previous months’ job totals were revised lower by 60,000, with April falling from 221,000 to 187,000 and May declining from 280,000 to 254,000.

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Market Recap Jul 1, 2015

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Indexes have spent the past 2 sessions working on a rebound from Monday’s selloff. Expectations continue for a last minute “stick save” in the Greece situation – since Lehman Brothers whenever there is an issue globally central banks and governments blink. It just takes a lot of drama for it to happen and that is the continued course of belief with Greece. At some point in the future maybe that will be the wrong way to think but until proven otherwise that is the precedent. Hopes for an eventual deal in Greece and good economic data helped indexes to some decent gains with the S&P 500 up 0.69% and the NASDAQ 0.53%.

U.S. futures leaped on morning news that Tsipras accepted lenders’ conditions in a two-page letter originally sent to the heads of the European Commission that requested only minor revisions to their suggestions on pensions and tax reforms. The Eurogroup of regional finance ministers concluded a conference call Wednesday on Greece’s latest proposal. No other meeting is expected before Sunday’s referendum.

Economic data was strong with the key ISM Manufacturing report bouncing back nicely to well over 50 – any reading >50 = expansion. ISM manufacturing topped expectations at 53.5, while construction spending rose 0.8 percent in May to a 6-1/2-year high. The ADP private sector employment report showed creation of 237,000 jobs, topping expectations of 218,000. Keep in mind the government employment data comes out tomorrow not Friday due to the market holiday.

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Market Recap Jun 30, 2015

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Indexes ended the first half of 2015 in a very similar fashion to most of the days this year – with little direction. The S&P 500 gained 0.27% and the NASDAQ 0.57%. The S&P 500 posted its smallest gain on record (going back to 1928) for the first half of the year, up just 0.20%. The index ended the quarter 0.24% lower, ending 9 consecutive quarterly gains. There is no shame in that considering the big gains of prior years – this year thus far is a consolidation period. Short term, investors are waiting out this week waiting for Greece this weekend. There is also the monthly employment data which will come out Thursday rather than Friday due to the market holiday.

Eurogroup President Jeroen Dijsselbloem said in a Reuters report that it is too late for an extension of the Tuesday deadline and that the institutions will only consider the request for a new program after the Greek referendum on July 5. German Chancellor Angela Merkel said on Tuesday that Germany would not negotiate on a new bailout agreement for Greece before its referendum which is planned for Sunday.

In economic news, the Chicago purchasing mangers’ index missed expectations and came in below the key 50 level at 49.4. Below 50 indicates contraction.

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Market Recap Jun 29, 2015

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Many assumed negotiations would go to the last minute and then a “stick save” would appear this weekend between Greece and its creditors – as has been the pattern for years globally since Lehman Brothers was allowed to fail. Talks fell through Saturday and markets misbehaved in reaction Monday. That said there is still time for a kick save – it is just going to have to be after the Greeks vote next weekend on whether they will accept the conditions. Unfortunately that means another week of Greek theatrics. Bill Witherell, Cumberland’s chief global economist, opined “the most likely outcome will be a last-minute deal, unsatisfactory for both sides, that again kicks the can down the road, avoiding ‘Grexit’. That said, the possibility of a truly dire end to this Greek tragedy has significantly increased.” Indexes opened down and took another leg down in the afternoon. The S&P 500 fell 2.09% and the NASDAQ 2.40% as both indexes closed at lows of the day.

Greek Prime Minister Alexis Tsipras called a referendum for July 5, in which Greeks will vote on whether to accept the austerity rescue package previously offered by Athens’ creditors. Stocks extended losses in late-afternoon trade as Tsipras said the stronger the rejection of the creditor deal, the stronger the Greek hand in the talks. He added that the aim for the referendum is to bring continuation of negotiations with lenders. S&P downgraded Greece to “CCC-” and said in a Reuters report that the probability of the country exiting the euro zone is now about 50 percent.

Greece’s banks and main stock exchange were closed Monday and were expected to remain closed for the week to prevent a run on financial institutions. The central bank also recommended a 60 euro ($66) limit on withdrawals from cash machines. An official later said the banks would reopen on Thursday.

Also quietly making news was Puerto Rico, as its governor said the commonwealth cannot pay its debt of about $72 billion.

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Market Recap Jun 26, 2015

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In this week’s episode of deal or no deal, traders thought it would be deal early in the week and then became disappointed later in the week when nothing happened. So we go into the weekend awaiting a “miracle agreement” before June 30th. The S&P 500 fell 0.04% and the NASDAQ 0.62% Friday. So off we go to Greece…

Greek Prime Minister Alexis Tsipras called an urgent cabinet meeting on Friday evening to discuss a bailout deal, Reuters reported. The country’s finance minister Yanis Varoufakis said that Saturday’s meeting with the euro group of finance leaders will try to converge on a deal that includes debt and funding. He added that Greece has made concessions and that Athens rejects a 5-month funding proposal from lenders. Leaders are scheduled to meet Saturday for another attempt to reach a deal ahead of the imminent June 30 repayment deadline. Earlier, European Commission President Jean-Claude Juncker said in a Reuters report he was “quite optimistic but not over-optimistic” of a deal with Greece on a cash-for-reform deal.

At this point all they are planning to do is kick the can for 5 months. Then we’ll be doing this all over again in November. Fun!

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