The E-Mini S&P 500 backed off the highs of Tuesday ($1369.50) possibly on second thoughts of the Euro debt crisis and how it may affect the US recovery. US Existing Home Sales report showed an increase of 4.3 % to 4.57 million units last month, the highest it has been since May of 2010. It may be attributed to warmer weather this winter or a signal that the bottom is in. Another possibility, although perhaps not widely done or publicized may be the bulldozing of foreclosed homes to keep the neighborhood values up and reduce the inventories of homes in the marketplace.
The inventory of unsold homes was reduced by 0.4% to 2.31 million last month. The median home sales price was reduced by 2% to $154,700 from a year ago. The distressed properties such as short sales and foreclosures accounted for 35% of the sales last month. The Federal Reserve is increasing the roles of Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), the government-controlled agencies, in the loan refinancing area. Thompson Reuters reports that out of the 424 companies of S&P 500 coming forward with earnings releases, 64% have exceeded expectations.
While the US is pointed toward modest recovery, global slowdowns may impact China and the US. Fear that any Eurozone recession could spill over into the global marketplace hangs overhead. Higher energy prices decrease the potential profits of corporations and simply point to an increased cost of living and cost of production for companies.
News that Greece had averted a potential default initially took the markets higher, but the realization that the indebted country may not be able to abide by the reforms has anxiety returning to the marketplace. The Eurozone slowdown may have a domino effect on other nations where the export demand becomes markedly reduced. Dutch Finance Minister Jan Kees de Jager and an unnamed US Treasury official have requested a secure firewall be placed around Greece to avoid any potential contagion effects.
The European Central Bank offered a half a trillion euros in cheap loans last year and are supposed to make a similar offering on February 29th. The additional credit has not persuaded lenders to extend their lending agreements. They have been re-depositing the funds back with the European Central Bank to reduce their risk.
The G20 will have a two-day meeting in Mexico this weekend to discuss further monetary contributions by the members expressly to aid in the Euro debt crisis. The group of 20 represents about 80 % of world trade. If Greece can continue the austerity program set forth, the support remains. If Greece cannot abide by the measures, Euro leaders may find alternative measures to contain the crisis.
The higher crude prices in light of the sanctions put forth by the US and the Euro leaders, have Iran producing and selling less for more money. Inventory API numbers are showing a build. Asian consumers have said that they would reduce supplies purchased from Iran. UN nuclear inspectors revealed that an Iranian research facility had perhaps been instrumental in Tehran's atomic program. The research facility was founded after the Iran/Iraq war in which chemical warfare was used against Iran.
On the stock side: JP Morgan Chase and Co. (JPM) was down 1.01 % to $38.07. Citigroup Inc. (C) was down 3.00 % to $32.35. Bank of America (BAC) was down 1.97 % to $7.93. Alcoa Inc. (AA) was down 0.29 % to $10.34. Boeing Co. (BA) was up 0.45 % to $75.95. Caterpillar Inc. (CAT) was up 0.70 % to $115.76. General Electric Co. (GE) was down 0.10 % to $19.38. Halliburton Co. (HAL) was up 3.27 % to $38.20. Hewlett Packard Co. (HPQ) was down 1.40 % to $28.66. SPDR Select Sector Fund - Financial (XLF) was down 1.29 % to $14.59.
E-Mini S&P 500 Chart.
click to enlarge
Thursday, what to expect: We maintain a bullish bias unless the E-Mini S&P 500 penetrates $1339.50. Today, we anticipate an inside to lower day. Wednesday's range was $1364.00 - $1353.00. The market settled at $1356.00. Our comfort zone or point of control for this market appears is $1358.00. Our anticipated range for Thursday's trading is $1362.50 - $1348.50.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
