US EQUITIES STUMBLE, BUT CLOSE NEAR UNCHANGED AS COMMODITY STOCKS, HIGHER BOND YIELDS PRESSURE OUTLOOK FOR RECOVERY.
US EQUITIES staged a late recovery on Monday; after wallowing in negative territory through most of the session, as perceptions of interest rate rises stalling economic recovery pressured a number of equity sectors. The continued rise in government bond yields as global supply reaches unprecedented levels and inflation worries re entered market sentiment pressured equities early in the session. A report stating large losses in the airline industry and a rising dollar took their toll on transportation and commodity stocks early in the session. Additional measures on the equity markets suggests that recent gains in the equity markets should be largely discounted when factoring in the influx of new issues purchased with government money and dividend yields have been cut the most since 1938.
Financial stocks were among the better performing stocks of the session as the markets awaited news on which banks would be the first to be allowed to repay TARP funds.
Commodity stocks were lower throughout most of the session, although they did manage to stage a late recovery after oil recovered and moved back into positive territory. Technologies fell despite Apple generating significant excitement at its Mac World conference, overcoming the notion that the company would stumble without the full leadership of Steve Jobs.
Technically, June S& P futures continue to range trade between 922.00 and the 946.00 range. The market in the near term remains slightly overbought and should pullback to test the 914.00 level in order to alleviate the overbought conditions reflected in RSI and the apparent crossover forming in the daily MACD. This 914.00 should hold on its initial test. If downward movement fails to pierce 922.00 on this attempt, look for a momentum breakout to test the 953.00 level.
DJM9 (JUNE DOW)
SPM9 (JUNE S& P)
NDM9 (JUNE NASDAQ)