Lower Open Appears In The Cards
A modestly negative pre-opening bias is in the cards.
Economic questions from last week and European markets weakness are weighing
down the futures this Monday.
Lehman’s comments on computer hardware are also helping to pull down the tech
sector.
Monday’s pre-open outlook
INTEREST RATES
OVERNIGHT
CHANGE to
3:43 AM
:BONDS +4 The bonds would appear to be poised to fully capitalize on broad based
sagging economic sentiment. In other words, double dip recession talk will
probably be seen on a number of news shows this morning and that concern, is
already being fanned by the economic reports seen outside of the US this morning
(the UK showed some of the softest manufacturing readings in 23 years!). In
fact, a number of respected sources are now suggesting that the Fed will
probably cut the Fed funds rate by 3/4 of a point, before the end of the year.
STOCK
INDICES
OVERNIGHT
CHANGE to
4:15 AM
S&P: -500 NIKKEI -4.7 FTSE -124 The overnight action would seem to be laying the
groundwork for a continuation of the downside, seen since the middle of last
week. Not only is the market fearful that the
economy is falling back into a recession, but it is also concerned that slowing
is showing up in the
and the Euro zone. In total the economic information from the
last week, set the stage for fears of a double dip recession, but the 5.3%
decline in
manufacturing for June, really shocks the market and hints that the slowing
could be a global situation and not something that is specific to the
FOREIGN EXCHANGE
Dollar: We have to wonder why
the Dollar is not falling sharply, given the macro economic setup and the
disappointment fostered by the
payroll numbers last Friday. It is possible that the
and the Euro zone are in the midst of their own slow-down realization.
Therefore, the Dollar looks to soften but may not come apart as it did in mid
July. However, we would have to think that the Dollar would find it very hard to
avoid some type of downside probe. Use the 106.00 level as a critical pivot
point for the coming week, while a rally above 108.00 in the current environment
would make a major statement in support of the Dollar.
EURO:
Service sector PMI readings declined in July, in the Euro zone, and that should
make it difficult for the Euro to capitalize off potential US Dollar weakness.
We have to think that the Euro will manage to find support above the 98.00
level, especially once the
numbers begin to flow. The Euro zone PMI dropped to 52.6 from 53.0, which isn’t
that significant of a decline but is nonetheless negative growth. A trade above
98.99 could spark some stop loss buying off recent short plays and might vault
the market toward the mid July highs by the end of the week.
YEN: Not
to be outdone, the Japanese have released a set of leading indicators but their
numbers would seem to be supportive of the currency. However, the Yen seems to
be directly correlated to the US Dollar and we suspect that some dual
intervention is keeping the Yen in line and the Dollar from falling sharply. We
would have to think that the Yen will tend to move toward resistance for most of
the week ahead.
GOLD
The
market would appear to be trying to climb above the $310 pivot point especially
since the buzz appears to have shifted into the bull camp. For instance, the
Newmont Mining President suggested that gold could be in for a $40 an ounce
rally and suggesting that even more gains would be seen if political and
economic problems surface in addition to the normal recovery. It should also be
noted that the Press is giving metals stocks credit for holding together during
the recent equity market washout and that could add to the favorable investment
talk fostered by the Mining executives comments.
CRUDE
COMPLEX
OVERNIGHT
CHG to 4:15 AM :CRUDE -35 ,HEAT -62 ,UNGA -62 NG -83 More indications that
the US economy is turning sour again is a big blow to bulls as energy demand
looks to be on a slippery slope. Reports that Russian exports rose in July is
just the beginning of what should be a steady rise in world production at a time
when world energy demand is sagging.