EmailThe June swoon continued for the equity market, which declined 1.1% on Monday. Once again, the complexion of the trade was pockmarked with slowdown concerns.
Volume was relatively light and cyclical sectors -- energy (-2.0%), financials (-2.0%) and consumer discretionary (-1.0%) -- paced the retreat.
The equity market is indicated to open higher this morning, however. The S&P futures are currently 0.5% above far value.
There hasn't been any specific news catalyst for the positive disposition, so it is being couched as an anticipated short-covering bounce following the recent selling that has seen the S&P 500 drop 4.4% over the last four sessions.
With important technical support levels being violated yesterday, participants will be watching to see if the early bid can be sustained as former support levels in the 1290-1294 areas pivot to become resistance points.
The equity market will be left alone with its own thoughts for the morning session. There is nothing of note on the docket until 1:00 p.m. ET, which is when the Treasury will announce the results of its $32 bln 3-Year Note auction. That will be followed by the April Consumer Credit report (Briefing.com consensus $6.0 bln; prior $6.0 bln) at 3:00 p.m. ET and a speech from Fed Chairman Bernanke at 3:45 p.m. ET on the oh-so-timely topic of "The U.S. Economic Outlook."
The timing of Mr. Bernanke's speech could make for an interesting close to the trading day if he provides any "new" insights on the outlook. It has been the Fed's position that the slowdown seen in the first quarter is transitory.
It seems likely that Mr. Bernanke will acknowledge the current spate of soft economic data and the May employment report in particular. Separately, we suspect he might also draw attention to the recent pullback in energy prices to substantiate the Fed's expectation that the inflationary effects of rising energy prices are also transitory.
It is our expectation that the Fed Chairman will emphasize the need to keep monitoring incoming data further and that he will repeat the party line that economic conditions will continue to warrant exceptionally low levels for the federal funds rate for an extended period.
In other words, we are not expecting any surprises from the Fed Chairman and we're certainly not expecting any Jackson Hole-like revelations that, wink-wink, suggest a new round of quantitative easing is in the offing.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is the Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial please email researchsales@briefing.com.
