US Equities fell for a second session as participants nervously awaited Alcoa, the aluminum producer and earnings bellwether, to release its 1st quarter earnings after the US markets closed. The actual release appeared to be somewhat of a non event for the broader indices. Reports showed a loss per share of 59 cents. The loss came in slightly worse than expected. However expectations were for weakened revenue stream based on the significant drop in aluminum prices over the last year. Despite the drop in revenue, the company did post slightly better than expected sales results. This glint of optimism allowed the major indices to rebound slightly in the aftermarket, holding above key support levels.
The recent pullback in equities, based on its relative calm and honoring of support levels, suggests that profit taking is a key driver for the equity pullback rather than a strong shift in sentiment. Based on this theory, expected that volatility should pick up in the next few weeks as surprises to the upside in earnings could fire up equities to run higher.
One stock that did have an effect on sentiment this session was General Motors. The automaker gave up nearly all of its gains from yesterday as reports surfaced that the “pension plan that occasionally makes cars” was in “intense preparations to declare bankruptcy”. Energy and material stocks also fell as crude oil fell in the wake of expected demand declines and a bearish EIA inventory number released on Wednesday.
Technically, June Dow Futures seem poised to continue a test to the downside. Near term support should be found at 7640. It is possible that this level could hold, allowing for a move back up toward 7905. Significant support remains in place at 7460. Should this level be breech, look for the next downward target at 7170. Volatility should remain high with false breakouts to the up or downside likely.
DJM9 (JUNE DOW)
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