S&P 500 Can't Hold 875 Level for Second Day
The market is lower in early trading, which is a bit of a change vs. the last few days. I am a bit surprised the market isn't down more, given the news that the government will delay the release of the stress test results on large banks.
The news is that the govt. will not announce the results on May 4th, as originally planned. This came about after executives continue to debate the findings, which investors are taking to mean that the results didn't exactly paint a rosy picture of banks.
There seems to be concern about what the disclosures could mean for certain banks' stock prices. No, really? So my takeaway is that there are obviously some banks that still need more capital. But the banks stocks, which opened lower, are all rallying now. Talk about a confusing market. There must still be tons of people short these financials. Given how these stocks are reacting today, maybe they should just release the results now!
In economic news, the ISM Manufacturing Index came in above expectations for April at 40.1 (vs. 38.4 consensus). This is up from the 36.3 reading in March, but overall still shows that the manufacturing sector is contracting (any reading below 50 signals contraction).
Asian markets were mixed overnight, with Japan higher as the Yen weakens (boosts exports); the dollar is lower vs. the Euro and higher vs. the Yen; oil is trading higher, while gold is down again; the 10-year yield continues to spike higher, touching its overhead 200-day average near 3.18%; and the VIX is +1.9% higher so far to 36.25.
Trading comment: The chart at the top of the page shows the difficulty that the SPX is having breaking above that 875 resistance (see pink line). On Wednesday, the SPX touched 882 but closed lower at 873. Yesterday, it spiked as high as 888 before closing lower at 872. So this resistance is strong around the 875 level, and the high volume churning yesterday without a convincing close above this key level has me leaning for a further pullback coming.
Today we could see new money that comes in at the beginning of each month being put to work, so I will hold off on drawing any conclusion until next week.