This week’s declines came even as the S&P 500 had its best two day gain of the year on April 11th and 12th sparked by optimism about earnings and signals from the Fed that interest rates will remain low.
The S&P has fallen 2.7 percent in April so far and is poised for the biggest monthly loss since September. The index just came off the best first quarter performance since 1998, posting a 12 percent gain. Last Friday’s dismal jobs numbers combined with Thursday’s rise in jobless claims were the main culprits for the sell-off this week.
Geopolitical concerns weighed in as well however as Chinese growth slowed in the first quarter. China announced that its economy expanded 8.1 percent in the first quarter, the slowest pace since 2009. There were whispers in the market on Thursday that the Chinese GDP data could come in closer to nine percent, spurring a rally of over one percent in the S&P and Dow. This was classic “buy the rumor sell the fact”, as the data missed expectations coming in lower. In other news Friday U.S consumer sentiment declined in early April, hurt by rising gas prices, according to a survey by the University of Michigan and Reuters.
Federal Reserve Chairman Ben Bernanke spoke at a conference in New York on Friday but refrained to discuss the current state of the economy or measures to spur growth. In fact there were plenty of speeches by Fed Governors during the week, expressing mixed views about maintaining low interest rates until 2014. In a separate report out of the EU, Spanish banks had borrowed heavily from the European Central Bank in March, underlying the continuing difficulties peripheral institutions are having in securing funding. A surge in Spanish and Italian bond yields this week fueled concern Europe’s debt crisis is worsening.
Going forward next week, nearly a fifth of the S&P 500 company’s report including blue chips IBM, Microsoft, Coca-Cola and McDonald’s. Big banks report as well highlighted by Citigroup and Bank of America. On the economic front, there are March retail sales, industrial production, existing home sales, and weekly jobless claims.
Europe will stay in the headlines as Spain issues bills Tuesday and longer dated securities Thursday, and investors will be watching to see if the auctions fare better than the auctions a few weeks prior. Also, European Central Bank President Mario Draghi speaks at the ECB statistics conference on Tuesday morning. Technical's come in as follows for the mini S&P next week. Support is down first at 1349.00, and with a close under 1332.75. Resistance is up at 1385.00 and with a close over next level up is at 1404.00. Please call or email me at anytime with questions or comments.
Daily Swing #s ESM2 (4/16)
R2-1397.25
R1-1381.25
Pivot-1372.50
S1-1356.50
S2-1347.75
Weekly S&P Swing #s (4/16-4/20)
R2-1404.00
R1-1385.00
Pivot-1368.75
S1-1349.00
S2-1332.75
Daily Swing #s YMM2 (4/16)
R2-13040
R1-12913
Pivot-12844
S1-12717
S2-12648
Weekly Swing #s YMM2 (4/16-4/20)
R2-13125
R1-12956
Pivot-12802
S1-12633
S2-12479
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