EmailSeven is considered to be a lucky number, so yesterday can be thought of as the equity market's lucky day as it broke a six-session losing streak with a 0.7% gain. Eight is also looked upon as a lucky number... in China.
We're not too sure if the number "8" has any special meaning in the U.S., so we'll simply hope today -- the eighth trading session in June -- isn't a crazy eight.
So far, things don't look crazy. Rather, things look a little bit hazy.
Following yesterday's advance, the S&P 500 futures are 0.2% below fair value.
The lack of follow through at this juncture isn't all that surprising considering the broader market faded into yesterday's close to pare its gains, leaving participants somewhat suspect that the market remains predisposed to sell into strength.
Mixed action in foreign markets hasn't created any trading excitement either, so today is setting up to be a test of the U.S. market's disposition. Will there be continued selling into strength or will the market manage to shake off any early losses and close the week on an upswing?
The market has its work cut out for it if it is to close the week with a gain. Entering today's session, the S&P 500 is down 0.9% for the week.
One of the reported drags this morning is a weaker-than-expected trade balance report for May out of China. We're not buying into that reasoning.
While it is true that China's trade surplus of $13.1 bln was below expectations in the high teens, it is important to note that the "disappointment" was a result of 28.4% import growth year-over-year that was stronger than expected. Exports slowed from the 29.9% increase in April, yet they were still up 19.4%.
As noted in the Wake-Up Call comment posted each morning to Briefing.com's In Play page, strong import growth for China is a positive for the global economy.
True to recent form, however, inferential priority is being placed on the deceleration in export growth when it comes to trying to come up with a reason for why the futures market is leaning negatively at the moment.
In other positive developments, Germany raised its 2011 GDP growth forecast from 2.5% to 3.1% and bumped up its 2012 growth outlook from 1.5% to 1.8%. Also, it has been reported that the German parliament voted in favor of a resolution to agree to a new aid plan for Greece.
There isn't much on the domestic economic front today. Export/Import price data were released a short time ago, showing a 0.2% increase for both export and import prices in May. That broke a string of 1.0%+ increases in import prices in each of the previous seven months; meanwhile, the uptick in export prices was the smallest since July 2010.
Excluding fuel, import prices were up 0.4%, which was the smallest advance since December 2010. Excluding agriculture, export prices rose 0.5%.
--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.
