On 7/13/12, Friday the 13th, the China GDP has traders excited over potential stimulus (go figure since the GDP numbers do not agree; the GDP numbers remain above 7.5%), so copper catapults higher taking the U.S. futures higher. JPM earnings are released pre-market and place a strong bid under financials. The one-two punch with copper, then financials, causes shorts to cover and a wild upside explosion in the stock market is underway. Consumer Sentiment is weak, the lowest since last December, but the upside euphoria ignores the news. Keystone’s NYA 40-Week MA Indicator turns bullish after spending the last four days on the bear side. In the afternoon, JPM says the trading loss from the ‘tempest in a teapot’ trading debacle may approach 5.8 billion instead of the 4 billion mentioned in the morning. Further, Dimon (CEO of JPM) then says the loss may approach 7.5 billion before it is all said and done. The markets continue to run higher anyway and JPM gains 6%. The SPX closes up 22 points, 1.7%, to 1357. The Dow Industrials close up 204 points, 1.6%, to 12777. The Nasdaq closes up 42 points, 1.5%, to 2908. The RUT is up 11 points, 1.4%, to 801. Interestingly, the SPX and Dow were flat on the week with the Nasdaq and RUT down a percent.
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On 7/16/12, Monday, the IMF downgrades the global growth forecast as expected. LaGarde telegraphed this weakness ahead of time and continues to plea for Euro leaders to meet and compromise to find solutions. The Retail Sales numbers are weaker than expected with auto sales a large negative surprise since robust sales were expected. Rumors within the auto parts supplier industry hints that orders are falling off a cliff which verifies the low demand for auto’s moving forward. The markets drop at the opening bell due to weakness in copper and the NYA Index. The 10-year yield drops under 1.45% printing all-time historic lows. France’s 2-year yield is 0.053%. Markets end the day flat in waiting mode for Chairman Bernanke tomorrow.
On 7/17/12, Tuesday, France and Belgium yields hit record lows. U.S. futures are up strongly as the global markets expect Chairman Bernanke to provide a favorable mention of QE today in his testimony before the Senate Banking Committee. At 10 AM, Bernanke does not provide the nod to QE so markets plummet. Bernanke hints that the hurdle will be higher for QE3 than QE1 and QE2. The dollar leaps higher and copper, commodities and equities sell off. The sell off does not last long as Bernanke then hints that the Fed has many tools available, but the Fed has not yet decided on what tools to use or when to use them. Bernanke continues to warn on the coming fiscal cliff and says if it occurs it will have a major impact on the markets and the weak recovery. Bernanke’s comments are viewed as more dovish as the day moves along so the markets recover and finish up with the SPX testing strong 1366 R and closing at the 2011 high at 1363.60-ish. The SPX closes up 10 points, +0.7%. The Dow finishes up 78 points, +0.6%. The Nasdaq gains only 0.45%. After the close, bellwether INTC disappoints by cutting its full year forecast. CEO Smith cites soft global growth moving forward and he sees a weak macro economic environment.
On 7/18/12, Wednesday, BHP Billiton and Rio Tinto drop on lower demand for commodities as global growth slows. China’s Wen Jibao says labor force is in worst shape than expected. Analysts are cutting European profit forecasts. The German 2-year yield is now negative for nine days and a 2-year auction goes off with negative yield for the first time ever. The Libor scandal deepens as bank executives resign and legal risks grow. Worry is mounting that the Libor scandal will affect the U.S. banks. The dollar is at 2-year highs. Housing Starts are stronger than expected which encourages the bulls. The markets enjoy another healthy up day.
On 7/19/12, Thursday, the Spanish bond auctions do not go well showing that there is a weakening demand for their bonds. Labor strikes are appearing on Spanish streets. Italian parliament gives final approval to the ESM fund. Futures are up large as China hints that a triple R cut may occur at anytime. Copper is very strong. MS earnings disappoint sending it down 5% pre-market. The markets move up early in the day but peak for the week at noon time. In the evening, Madrid police fire rubber bullets into rioting crowds. GOOG and MSFT earnings beat slightly which provides hope for the tech rally to continue.
On 7/20/12, Friday, markets drift lower as the U.S. open approaches. Finland and Germany vote to back the Spanish bailout. At about 8:15 AM EST, Valencia, a region in Spain, asks for bailout help. The euro and futures markets drop lower. China tightens the property rules to tone down their housing bubble but this is the exact opposite of why copper leaped higher yesterday. Traders were expecting China to ease and are caught completely off guard. Copper collapses 2%. The euro drops under 1.22 to a 2-year low. An ugly close occurs for Europe at 11 AM EST adding further negativity to U.S. equity markets. European, especially Italian, banks are crushed today. The SPX ends the day down 14 points, 1%, to 1363. The Dow Industrials are down 121 points, 0.9%, to 12823. The Nasdaq is down 41 points, 1.4%, to 2925. Note the tech weakness compared to the broad market. For the week, the indexes finished up about one-half percent. On what should have been a positive day since the Spanish bailout appears to be a done deal, the markets sold off strongly instead, a sell-the-news type event. Instead of Spanish yields moving lower, they catapult higher with the Spain 10-year yield blowing out to 7.27% and higher, and the Spain-Germany 10-year spread blowing out to over 600 points. The collapse in the Spanish bond market and the riots are causing great concern. Anti-euro sentiment is growing in Italy and there is a fear that rioting will increase in Italy, especially after union bosses say strikes are being planned.
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On 7/23/12, Monday, MCD earnings.
On 7/24/12, Tuesday, AAPL earnings.
On 7/25/12, Wednesday, New Home Sales. BA and CAT earnings.
On 7/26/12, Thursday, Durable Goods and Jobless Claims. AMZN and FB earnings.
On 7/27/12, Friday, GDP. Consumer Sentiment.
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On 7/30/12, Monday…
On 7/31/12, Tuesday, EOM. FOMC Meeting Begins.
On 8/1/12, Wednesday, ISM Mfg Index. FOMC Rate Decision.
On 8/2/12, Thursday, Jobless Claims.
On 8/3/12, Friday, Monthly Jobs Report. FOMC Rate Decision.
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