DATA RELEASES 04/07/10
10:30 AM EIA INVENTORY (CRUDE)
1:00 PM US 10 YEAR NOTE AUCTION
DATA RESULTS 04/06/10
US 3 YEAR NOTE AUCTION ($40B-B/C 3.10; YIELD AWARDED 1.775%)
FOMC MEETING MINUTES-CONTINUED LOW INTEREST RATE POLICY, COMMITTEE SEES SOME IMPROVEMENT, CONTINUED HEADWINDS FROM EMPLOYMENT, HOUSING
US DEBT REVIEW AND OUTLOOK
US Treasuries rebounded on Tuesday’s session. Gains were driven early by short covering and renewed interest in holding seemingly secure debt after the recovery plan for the Greek fiscal crisis hit additional snags. Gains drifted away in the later part of the session after the second treasury auction of the week. $40 billion of US 3 year notes were received as a mixed blessing. Bid to Cover was relatively strong at 3.10 but the reception came at a cost of higher yield than expected. The short end of the yield curve received a late day boost from the FOMC meeting minutes. The committee reaffirmed its intention to keep US interest rates low as improvements to the economic picture remain vulnerable to ongoing problems of unemployment/underemployment and the hangover of housing issues as a number of variable mortgages get ready to reset.
WED EARLY CALL-US Treasuries are mostly higher as global risk tolerance drops in the wake of an OECD (Organization for Economic Co-operation and Development) report suggesting that the German Economy-the largest in the Euro zone-is showing vulnerability to a double dip contraction due to the eventual drop in support for the inventory recovery cycle. New demand for goods and services remains uncertain. Expecting mostly quiet trading in Treasuries before today’s gauge of demand for longer term debt from US 10 year note auction.
Technically, June 30 year Treasuries are setting up for a test of significant support at 113-29 A break of this level could set market up for test of 113-10. Initial upside appears limited to short covering and should find initial resistance at 114-26, with a break of this level setting up a possible rebound to 115-08.
US EQUITIES REVIEW AND OUTLOOK
Stocks rose cautiously on Tuesday. The major equities received a late day lift from the FOMC minutes which essentially gave the markets further indications that the interest rate training wheels are not ready to come off. This is an example of how combinations of good news and bad news can help to lift equity markets higher. REITS were among the best performing sectors while homebuilders and semiconductors lagged behind in gains. Homebuilders in particular were weak reflecting the concern for home prices and demand as the full effect of the end of the homebuyer tax credit and another wave of resets for variable mortgages are on the way.
EARLY CALL-Stocks are coming lower from the overnight. Primary weakness coming out of Europe after report showing that the German economy-the benchmark for the Euro Zone-may be susceptible to a double dip contraction in export demand appears to be subsiding as US session opens.
Technically, June S&P futures moved higher, testing the next key level of resistance at 1188.00. Market appears overbought and could set up correction to initial level of 1175.75, with support setting up at 1173.50. Resistance sets up at 1193.50, with a break of this level setting up possible move to 1210.00
Prepared by Rich Roscelli & Paul Brittain.
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Whitehall Investment Management Futures Market Summary
DATA RELEASES 04/07/10