Holding Pattern
Market Commentary
By Charles Payne, CEO & Principal Analyst

The market held above key support yesterday and today has exhibited even more gumption. I like this a lot although it's mostly a holding pattern, we could be in full on dive mode. That said resolve was the key component of the rally all year long and now that the wheels are coming off there has to be a bunch of gritty sessions. I think we've found a sweet spot for buyers but a true catalyst remains the problem. Ironically, there is not much other than threats and vitriol coming out of Europe today, just a couple days ahead of a summit that should have consequences.

Markets Trying to Find Support
By Carlos Guillen

Investors appear to be taking a rather cautious stance during today's trading session as reflected by the rather stagnant market indexes. While there was some slightly positive data from the housing market, consumer confidence data certainly dampened any enthusiasm that might have resulted from housing. Moreover, with Spanish and Italian yields climbing, investors certainly have a reason to remain mostly on the sidelines today.

Perhaps most significant today was that the Conference Board announced that its consumer confidence index decreased to 62.0 in June from 64.4 in May, below the Street's expectation of 64.0. The result represented the fourth sequential decline, mostly as a consumers felt more pessimistic about the short-term outlook than they did about the current economic conditions. After increasing in May, income expectations have now declined, increasing the risk that consumer spending might slow down in the near term, certainly not good for Gross Domestic Product growth.

Consumers are still finding it difficult to get jobs as those stating that jobs are "hard to get" increased to 41.5 percent from 40.9 percent. This certainly reflects the rather poor jobs data that we have been observing most recently. Even more significant is that expectation for income growth is looking worse, with the proportion of consumers expecting an increase in their incomes declining to 14.8 percent from 15.7 percent.

A bit encouraging today was data from the housing front showing that home prices fell in April at the slowest pace in more than a year, adding to signs the U.S. housing market was firming. According to the Case-Shiller index, home prices declined 1.9 percent in April when compared to the year ago level, representing the smallest decline since November 2010, after decreasing 2.6 percent in the year ended March. The result was also better than the Street's consensus calling for a year over year drop of 2.5 percent: more details on this below.

On the European front, Spain's short-term borrowing costs continued to climb after selling 3.08 billion euros of its short-term debt, as the nation's Treasury paid the highest rates to sell the notes since November. The positive aspect of the auction was that Spain was able to get access to capital markets; however, with rates continuing to climb it is becoming difficult to see how much more it can borrow. All eyes will remain focused on Europe this Thursday and Friday as the EU summit is sure to bring an interesting flow of comments that will certainly shake the market, as always.
Home Prices
By David Urani

The April Case Shiller home price index says that prices were up 0.7% month to month, above the 0.4% expected gain. That made for three months in a row of increases. Okay, now to shoot straight with you, I'd say the market shouldn't be reading into the release too much simply because of the fact that it's from April (and it's also a trailing 3-month average on top of that), so it's a heavily lagging indicator. That's particularly important at the moment considering it isn't reflecting any of that European carnage yet.

I will take a silver lining from this report though in that prices look to have bottomed out, along with a rise in sales during the same period. In that sense, I think that if it weren't for Europe the housing market would be staging a broad recovery right now. But now I fear the proverbial wrench has been thrown into that idea over the past couple of months, as with most everything else.

Europe Rumor Mill Roundup

* The ECB is no longer accepting Cyprus bonds as collateral
* Traders are whispering about a downgrade of Spanish debt to junk by Moody's
* Merkel says NEIN to Eurobonds, saying she won't have shared EU debt liability "as long as I live"

And the good news:

* EU discussing removing preferred creditor status of ESM fund (means current bondholders would retain rights to payment upon bankruptcy)

Add a Comment!