Bond Yields Rise On Stronger Economic Data

The markets are nicely higher in early trading after a handful of better than expected economic reports as well as some positive reactions to more earnings reports.

In economic news, Q2 GDP grew +1.7%, above estimates of 1.1% growth.  Also, the ADP Employment Report showed the private sector added 200k jobs in July, which was also above expectations.  And the Chicago PMI for July rose to 52.3 from 51.6 last month.

Those strong economic reports led to buying in stocks and selling in bonds.  The Dow was up 100 points earlier, but has faded a bit since.  Bonds are selling off and pushing yields higher.  The 10-year yield is up to 2.68%.  It high from earlier this month was 2.72%.

We also will get to see the Fed's latest policy statement when it is released at 2PM EST today.  While most don't think the language will be changed much, there could be some hints about when the Fed might taper and if they mention lowering the unemployment target or other dovish comments.

Stocks rising on earnings:  SODA, MA, BUD, BWLD, CMCSA, GRMN, HUM, AGN, HSP, HES, H

Stocks falling on earnings:  AMGN, AMT, EXC, SO

Asian markets were mixed overnight.  Japan fell by 1.5% after its manuf. PMI slipped to 50.7 from 52.3.  China was up slightly after a govt. entity reaffirmed the 7.5% growth target.

Europe's markets are also mixed.  Eurozone unemployment remained unchanged at 12.1%.  In Germany, retail sales fell -1.5% last month.

Commodities are mixed.  Oil prices are higher near $104.30.  Gold prices are lower to $1309.  Copper prices are higher also.

Despite the rise in stocks today, the volatility index is up 1.2% still near the 13.56 level.  This could be perceived as a yellow flag that the VIX isn't moving lower with stocks up.

Trading comment: We have discussed the fact that with the market merely trading sideways it could lead to another push higher.  Moreover, with month end approaching we could see some window dressing which would also exert upward pressure on stocks.  Both seem to be playing out so far today.  The S&P 500 still needs a few more points to surpass its earlier highs this month, but the Nasdaq has moved into fresh high territory. 

KAM Advisors has long positions in SODA, AMGN

Russia Upsets The Potash Cart

The market is a bit higher this morning after yesterday's mild pullback.  The big dislocation in the markets today is in the potash market, which is an agricultural fertilizer product.  Russia's OAO Uralkali withdrew from the potash cartel and that has the stocks of the other players reeling.  POT and MOS are taking it on the chin, as one analyst said Russia leaving the cartel is like Saudi Arabia leaving OPEC.

In economic news, consumer confidence for July fell back to 80.3 from 82.1 the prior month.

Earnings reports continue to come in and this morning I am seeing more stock rise on their earnings reports than fall.  To wit:

Stocks rising on earnings: HLF, MRK, PFE, BYD, MGAM, CMI, AGNC, ECL, IPGP, NEE, AMG, OSK, WU, ROK

Stocks falling on earnings: DDD, APC, COH, HMA

Asian markets were mostly higher, led by a rebound in Japan despite the govt. tempering their expectations for 2014 GDP growth.  Also, India was lower after the Reserve Bank held its key interest rate unchanged at 7.25% and lowered its own GDP forecast to 5.5% from 5.7%.  In China, the PBOC injected 17 billion yuan into the markets to help ease rising SHIBOR rates.

Most European markets are higher today.  The IMF confirmed the next tranche of aid to Greece for 1.7B euros.

Most commodities are lower.  Oil prices are lower to $103.30.  Gold prices are down near $1322.  Silver and copper prices are lower as well. 

The 10-year yield is up fractionally near 2.59%.  Ditto the VIX which is hovering near 13.50 still.

Trading comment: Yesterday's market decline was another benign pullback.  We could see some buying as we get towards the end of month/beginning of new month simply due to fund flows, etc.  Other than that markets continue to hold up well and shrug off most of the bad news that hits the headlines.  No one would have been too surprised to see a deeper pullback from the recent highs in the market, but so far the market has merely been moving sideways.  The market could be lulling investors into a sense of complacency, but so far there have been no catalysts that have gained any traction on the downside.

Monday Morning Musings

The markets are a bit lower this morning, but as we have seen recently dip buyers seem to be lurking everywhere.  Friday looked like we were going to see the markets have a decent pullback but dip buyers emerged and the markets climbed all they way back to finish positive.

Earnings season winds down a bit this week, but there are still several reports we will be watching.  This morning a few stocks such as WYNN, TEN, and CNA are higher after reporting earnings while BEN, HTZ, and SOHU are lower.

There was a little flurry of M&A over the weekend.  Saks got an offer from Hudson Bay to be acquired for $16, but that is just a 4.5% premium to Friday's close.  Perrigo (PRGO) agreed to acquire Elan (ELN) for $16.50, a 10.5% premium.  Michael Baker (BKR) will be acquired by Integrated Mission Solutions for $40.50, a 37% premium.  And Omnicom (OMC) and Publicis said they will enter into a merger of equals.

Asian markets were lower overnight, led down by Japan which slid -3.3% after the BoJ governor spoke but failed to offer anything new in his comments.  This disappointed markets which were looking for more of an update on BoJ thinking.

The dollar is up a touch today but so are some commodities.  Oil prices are up a little near $104.95 and gold prices are a bit firmer to $1330.

The 10-year yield is also up to 2.58%.  And the volatility index is up 7% to 13.65, around the same levels reached on Friday before a big turnaround lower into the close.

Trading comment: Like we have seen many times this year, the market was very overbought last week and probably should have pulled back more but dip buyers were lurking and quickly used the dip to put more money to work.  This has left a very shallow pullback on the charts.  But as we have said, one of the most bullish ways a market can work off an overbought condition is to merely consolidate in a mostly sideways fashion.  This seems to be what we have seen so far.  And the longer the market trades in this sideways fashion the more likely it is that we see another upside breakout and a push to further new highs.  The one wildcard is investor sentiment which continues to grow a bit complacent and that could lead to one of those surprising selloffs that seems to catch investors off guard once in a while.

Is Japan Hinting About Its Own 'Tapering'?

Markets are lower this morning, continuing this week's choppy correction that has been somewhat modest compared with past pullbacks from overbought levels.

Earnings reports continue to roll in.  A standout on the upside last night was Starbucks, which posted a surprising 9% increase in same-store sales.  On the downside is Expedia, which is down -25% today on disappointing earnings.

Stocks rising on earnings: SBUX, HMSY, DLR, SWK, SSD, DNB, ATVI

Stocks falling on earnings: SWI, EXPE, AMZN, CERN, WYNN, KKR, KLAC, DECK, DRC, LEG, TPX, BGG

In economic news, the Univ. of Mich. consumer sentiment survey was revised higher to 85.1 from 83.9 previously.

Asian markets were mixed overnight.  But Japan was sharply lower by 3%.  The Japanese finance minister suggested that inflation is picking up and nearing the Bank of Japan's target.  He implied that the country may soon be able to scale back on its asset purchases.  Markets didn't like this hint of 'tapering'.  Markets had come to expect this to be a multi-year experiment for the Bank of Japan. 

I think it is unlikely that they would taper so soon after reaching their target.  That would open too much of a risk for inflation to quickly decline again.  A more prudent approach would probably to allow inflation to rise above their target for a bit, as it is much easier for central banks of developed economies to tighten monetary policy and reign in inflation.

European markets are mixed after Greece received approval for its next tranche of bailout funds.

The dollar is a bit lower, but so are most commodities.  Oil prices are lower near $104.25 and gold prices are down a bit to $1327 so far.

The 10-year yield is lower today falling back to 2.57%.  And the volatility index is up 5% to 13.70 but still shy of the 15 level that we could see in the near-term.

Trading comment:  The selling in the market seems to be picking up.  Volume appears light so far and it is unlikely traders will make a big stand and step up to buy ahead of the weekend.  So bears might have a win for today.  But this action isn't all that surprising in light of the rally the market has enjoyed and the overbought condition we have been highlighting.  Patience will allow for the market to come in more, and then those stocks that had strong earnings reports can be bought on weakness.  Stocks still appear to be the favored asset class into the second half of the year.

KAM Advisors has long position in SBUX, CERN

Homebuilders Surprise To The Downside

The markets are mixed this morning on another heavy day of earnings.  The Nasdaq is outperforming again due to strong earnings reactions from Facebook, Qualcomm, and F5 Networks to name a few.  On the downside, surprising negative reactions to the earnings from homebuilders like DR Horton and Ryland.

Stocks rising on earnings: BIIB, FB, ASGN, CTXS, BIDU, FFIV, V, QCOM, FLS, TRIP, BWA, GNC, CELG

Stocks falling on earnings: DHI, RYL, PHM, MMM, LVS, EQIX, ANGI, TSCO, WDC, ALXN, UAL

In economic news, durable goods spiked +4.2% but it was entirely due to transportation orders (cars, planes, etc).  Ex-transportation durable goods were unchanged. 

Bond yields are rising again today, but its hard to see why its due to any economic data or commentary from the homebuilders.  The 10-year yield is higher to 2.62% and weighing on most yield-sensitive investments (bond funds, REITs, preferreds, etc).

Asian markets were lower overnight.  S. Korea's GDP rose 2.3% in the most recent quarter.  Europe's markets are also lower today.  Eurozone private loans declined -1.6% yr/yr.

The dollar index is a bit lower and commodities are mixed.  Oil prices are weaker near $104.75.  But gold prices are higher to $1330.  Silver and copper prices are firm also.  The gold etf (GLD) continues to battle with its 50-day average for the 4th day.

The volatility index is higher again to 13.42, but still trading in the middle of that 13-15 zone we have discussed recently.

Trading comment: We said in the beginning of the week that the market was overbought and due for a rest.  Moreover, that the most bullish outcome for investors would be some sort of sideways consolidation rather than a sharp selloff.  It looks so far like we are getting the former, with the SPX down about 10 points so far this week.  As we discuss during most earnings seasons, our game plan would be to focus on those stocks that reported solid earnings and had positive reactions and then look to buy them or add to them on pullbacks due to overall market weakness.

KAM Advisors has long positions in FB, FLS, V

Apple Tops Low Expectations

The market is mixed this morning with the Nasdaq outperforming the S&P on the heels of better than expected earnings from AAPL.  Expectations had gotten pretty low for AAPL given its lagging stock prices and lack of new products in recent quarters.  But the company surprised the Street by selling more iPhones than analysts expected as well as beating the earnings estimates.

The reaction in the stock was positive and today it is up by nearly 6% and helping to boost the Nasdaq.  There were a few other tech stocks that are higher after reporting as well.  Overall I am seeing more positive earnings reactions this morning than negative:

Stocks rising on earnings: AAPL. EMC, VMW, BA, LL, F, JNPR, MSA, TUP, GD, NOC, MCO, TMO

Stocks falling on earnings: CAT, T, BRCM, PNRA, STX, TROW, RLGY

In economic news, June new home sales rose more than expected to 497,000.  This was also up from the previous month's rate of 459,000,

Asian markets were mixed after China's HSBC Manuf. PMI fell to 47.7 from 48.2 last month.  It is falling deeper into contraction territory, which doesn't bode well for GDP growth accelerating in the near term.  China is struggling to hold GDP growth above the 7% rate it desires.

Europe's markets are mostly higher after PMI readings in the region were pretty solid.  The Eurozone Manuf. PMI climbed above the 50 level (to 50.1) that marks the line between expansion and contraction.  The services PMI remained in contraction at 49.6, but this is up from last month's level of 48.3.  Separately, the ECB said its bank lending survey pointed to a drop in loan demand which is expected to persist into Q3.

The 10-year yield is rising today to 2.58%.  And the VIX is higher to 13.0, which is still a pretty low level.  I wouldn't be surprised to see some market pullbacks get the VIX back to the 15 level.

Trading comment: Techs are leading the early action while energy and materials are lagging.  The tech sector has lagged for most of the year, so some rotation and outperformance from this group would not be surprising.  The market seems to be hanging in there near its recent highs despite reaching overbought levels.  For investors, this is the most bullish way to work off an overbought condition.  We could still see more of a selloff, but so far the selling pressure has been mild.

KAM Advisors has long positions in AAPL, EMC

China Sets A Floor For Growth

The markets are mostly lower in early trading as earnings season heats up and reports come rolling in.  Of all of the stocks reporting earnings last night and this morning, the reactions in stocks seems to be mostly a mixed bag with nearly an equal number of stocks rising on earnings as falling.

Stocks rising on earnings: UTX, DD, TXN, FCX, BTU, LMT, CPLA, PII, BEAV

Stocks falling on earnings: NFLX, STM, MO, TRV, ALGT, ITW, R, WAT

In economic news, the FHFA Housing Price Index for May rose 0.7% on top of a 0.5% gain the prior month.

Asian markets were higher overnight.  The big news was the Chinese Premier saying that China would not tolerate growth below 7%.  He didn't elaborate on what exactly they would do to ensure it, and plenty of skeptics think that current Chinese GDP figures are overstated.  In Japan, the PM's cabinet upgraded its economic assessment for the third consecutive month.

In Europe, markets were higher this morning as well.  The Bank of Spain upgraded its growth expectations for Q2 GDP, although the central bank still expects the economy to post its 8th consecutive quarter of contraction (-0.1%).

The dollar is a bit lower today.  Oil prices are roughly flat near $106.90.  Gold prices are slightly lower after yesterday's big rally, and trading near $1332.

The 10-year yield is up a little to 2.51%.  And the VIX is up 5% today but still at a very lower absolute level at 12.90.  I would expect to see some spikes in the VIX as it bounces between this 12.5 - 15 level in the near-term.

Trading comment: The SPX came close to the 1700 level this morning before turning lower.  With the market still in overbought territory, this is a logical level for the market to pause.  There is still a chance that the market could make another stab higher and try to suck in more folks, but our sense is that we are due for some consolidation at the very least.  The healthiest action is always some sort of sideways trading action that works off the overbought condition.  There is also an outside chance that we have a bigger correction.  I don't know what the catalyst would be, but sentiment does seem a bit complacent at this juncture and sometimes that provides a slippery slope in and of itself.

KAM Advisors has long position in BEAV, UTX

Monday Morning Musings

Back in the saddle after my vacation back on the east coast.  For those who live in the East, my kids and I travelled to Bethany Beach, DE where I vacationed as a kid.  Travelling there from LA is quite a hike, and I feel like I need another vacation from my long day of travel alone.  I also want to give a shout out to Nick for filling in for me with guest posts last week.  Nice job, Nick.

The markets didn't really skip a beat last week, and kept stair-stepping higher in a continued surprising fashion.  Several market strategists I follow are calling for a market high somewhere in this area and a late summer correction.  This has been a tough call, so we shall see.

In economic news, June existing home sales came in below expectations and also below the prior month's levels.  Housing stocks are lower on the news.  Bond yields are also lower, with the 10-year yield down to 2.48%.  Some have speculated that the weak housing numbers could give the Fed pause on its taper talks.

In earnings news, the big report this morning was McDonalds which reported disappointing earnings and the stock is lower.  MCD cited a challenging market caused by economic uncertainty.

Markets in Asia were higher, led by China after the PBOC said it would removed the floor from lending rates.  Europe's markets are trading mixed today.  In Portugal, the PM said the coalition govt would remain in power and honor bailout commitments.  Bond yields fell 51 bps to 6.23%.

The dollar index is lower today and that is helping precious metals rally.  Gold prices have spiked above the $1300 level to $1326.  Silver prices are up 4.4%. 

The volatility index broke below the 13 level on Friday and currently sits near $12.80.  We correctly alerted readers that a break below the 15 level, which occurred on 7/5, was likely to usher in another rally attempt at new highs.

Trading comment: The market is currently overbought at these levels, and is certainly due for a rest.  That has been a tough bet all year, but it seems folks are growing more bullish by the day and rising complacency could usher in a bigger pullback than most are ready for.  Biotechs have been on fire recently, and some big ones are scheduled to report this week.  We also hear from AAPL tomorrow, which should be an interesting report given the company has no new products and foreign markets seem to be slowing down.

KAM Advisors has long positions in AAPL, MCD

Guest Post: Friday

Market trading relatively flat this morning. Crude oil continuing to climb higher, now above $109/barrel, and metals are trading higher. The dollar is down while the Euro and the Yen are both trading slightly higher.

In other news, Detroit has become the largest city in US history to file for bankruptcy after accumulating $18.5 billion in debt. Moody affirmed US sovereign rating at Aaa, outlook changed to stable from negative. Bernanke's testimony to Congress contained little new information. Treasury market reaction remained relatively quiet following Bernanke's comments of rising yields as a reflection of the unwinding of leveraged investments.

Earnings season is now heavily underway as some big names have reported today. Chipotle (CMG) beats on earnings and revenue. General Electric (GE) reports an earnings beat on below-consensus revenue. Google (GOOG) missing earnings and revenue. Honeywell (HON) had an earnings beat and tech giant Microsoft (MSFT), missed on earnings and revenue. The Google and Microsoft misses are weighing heavily on the technology sector today. Also, the health care sector is notably holding gains because of biotechnology strength.

In other corporate news, Boeing (BA) facing problems again as a Tokyo bound 787 Dreamliner had technical issues and a 777 had engine issues over in Houston. Stock is trading slightly lower on the news. 

Asian markets generally lower. Japan's foreign bond buying increases by JPY 1.1 trillion following the prior week's JPY 973.9 billion rise. China has removed the floor on lending rates, but it has maintained the rate ceiling. 

10 yr yield slightly lower at 2.49% and the VIX at 13.14, getting closer to a region of support. 

Written by: Nicholas Mueller

Guest Post: Thursday

Dow and the S&P at new all time highs. The Dow rising 1000 points in 17 days and the S&P also rising 8.3% in that time. GDP estimates have been down trending, macro data has been disappointing, and earnings haven't been outstanding. This is Chairman Bernanke's world and the fundamentals are no longer relevant. It will be interesting to see how the Fed crawls out of this liquidity trap.

With that said, traders are intently tuned into Bernanke's testimony as he speaks again for his second day in front of Congress, this time in front of the Senate Banking Committee.

In corporate earnings news, American Express (AXP) reported above consensus earnings on revenue below estimates. eBay (EBAY) reported in line earnings but was discounted by cautious third quarter guidance. IBM beat on earnings but missed revenue. Intel (INTC) reported in line earnings but lowered guidance. Morgan Stanley (MS) beat earnings and revenue expectations.

Asian markets ended mixed overnight. China's house prices have risen 6.8% month over month and the government is increasing credit support for exporters to improve trade. Over in Greece, parliament passed a bill calling for 25,000 layoffs in the public sector.

In economic news, initial claims decreased by 24,000 to 334,000. However, this number is difficult to take at face value due to seasonal adjustment problems and there is a lot of whipsaw volatility in the data.

VIX is lower at 13.50 and the 10 yr sits at 2.52%.

Written by: Nicholas Mueller

Guest Post: Wednesday

Markets are trading quietly this morning waiting for Bernanke's testimony in front of the House Financial Services Committee. I'm interested in any unexpected remarks from the Q&A section. Bernanke's prepared remarks reiterated the Fed's intent to remain data dependent, primarily focusing on the unemployment and inflation objective, nothing new or surprising here. Comments from the chairman weakened the dollar causing an early rally in metals.

In economic news, June housing starts came in well below expectations and building permits also disappointed. An interesting fact: housing starts had the biggest miss since January 2007, and the permits number is the largest miss in history.

In corporate earnings, Bank of America (BAC) beat earnings on in-line revenue and trades slightly higher. Novartis (NVS) trades 1.4% lower after missing earnings and revenue. Abbott Labs (ABT) reported an earnings beat on below-consensus revenue.

Across the pond, the Bank of England held a unanimous vote to maintain the key interest rate and asset purchases of GBP375 billion. More financial chaos in Greece as they now may be looking at a EUR10 billion funding gap.

Asian markets were mixed in the overnight session. China's ministry of commerce commented that their appreciating currency has lowered the country's cost advantage. Trade conditions were described as 'severe'.

10 year yields are lower at 2.48% and the VIX is trading at 14.14.

Written by: Nicholas Mueller

Guest Post: Tuesday

Action around the world paints a mixed picture for equities this morning. Commodities are mixed while the dollar trades lower. Metals trade higher and energy modestly lower.

In corporate news, Coca Cola (KO) trades lower as it reports in-line earnings on below-consensus revenue. Goldman Sachs (GS) beats on earnings and revenue and Marathon Petroleum (MPC) lowers its second quarter earnings guidance below consensus. Johnson & Johnson (JNJ) beats on earnings providing some lift to the health care sector.

For US economic reports, June consumer prices rose 0.5% and June industrial production rose 0.3%.

European indices saw a lot of economic data today. To name a few, the Eurozone reported a trade surplus of EUR 14.6 billion and CPI came in at 1.6% year-over-year as expected.

Asian markets traded slightly higher in the overnight session. India fell slightly lower as the Reserve Bank of India raised its lending rates for banks and released plans to get rid of excess liquidity from the system. In Japan, economy minister Akira Amari planned to raise the sales tax.

The VIX has ticked up slightly to 14.07 and the 10 year is slightly lower at 2.54%.

Written by: Nicholas Mueller

Guest Post: Monday

US markets open the session with slight gains as business inventories rose 0.1% during May.

Commodities are mixed with metals trading slightly higher and energy lower.

Asian markets registered overnight gains with both the Hang Seng and the Shanghai composite trading higher. In Japan, the Nikkei was closed for Marine Day. China's second quarter GDP rose 1.7% quarter-over-quarter while the year-over-year figure climbed 7.5% as expected. This eased some fears of a deeper slowdown following the Finance Minister's comments of growth as slow as 6.5% last week.

European markets trade near their lows after early session gains. Spain's IBEX lags the rest of the regional indices after weekend protests called for the resignation of Prime Minister Mariano Rajoy due to evidence of a kickback scheme.

In US corporate news, AT&T has agreed to acquire Leap Wireless for $15 per share.

Citigroup trades higher after reporting an earnings beat, leading Financials to be the top performer this morning.

Industrials got a boost from Boeing after reports indicated the Friday fire on the 787 Dreamliner was not due to battery issues.

Quarterly earnings are ready to kick off this week.

The 10-year yield sits at 2.55% and the VIX remains flat at 13.93.

Written by: Nicholas Mueller

Wonering About China GDP

The markets are roughly flat this morning after yesterday's outsized rally.  The prelim Univ of Mich consumer sentiment survey for July came in at 83.9 from 84.1 last month.

Asian markets were mixed ahead of China's GDP report due out Monday.  The country's official target is 7.5% growth, but some have started to question if they can achieve that given the liquidity crunch they are facing and the air coming out of the property bubble.  Finance minister Lou Jiwei said he is confident the country can achieve 7.0% growth, but 6.5% growth would not be a 'big problem'.  I wonder if he is trying to talk down expectations.

In earnings news, both JP Morgan and Wells Fargo reported earnings this morning that beat on the bottom line.  JPM saw a 7.0% decrease in mortgage originations while WFC reported a 2.7% increase.  But both stocks are higher this morning and helping to boost the financial sector.

On the downside, UPS is lower by 5% after cutting guidance for Q2 and the full year.

European markets are mixed.  The ongoing political turmoil in Portugal caused the Troika to push back their aid review by a couple of months.  Elsewhere, Standard & Poors affirmed Germany's 'AAA' rating.

The 10-year yield is hovering near the 2.58% level.  It has eased back after Bernanke's comments soothed investors.

And the VIX is still low at 13.91, increasing the odds that the SPX tests its yearly highs in the near future.

Trading comment: The market has had a sharp rise since its late June lows.  A possible scenario from here would be for the market to experience some sideways consolidation before breaking out to new highs again.  The initial reaction to bank earnings has been positive, but earnings season heats up next week with all sorts of companies reporting.  So we will have to see if management's sound a cautious note about 2H13 or if they remain cautiously optimistic.  The reduced guidance from UPS this morning is a little disconcerting for those looking for economic growth to pickup in the latter half of the year.  Why isn't UPS seeing it?

Bernanke Moves Markets With Few Words

Markets are sharply higher this morning after Fed Chairman Bernanke spoke yesterday.  The surprising thing is that he really said very little that differed from recent statements.  The fact that he struck a slightly more dovish tone seems to have emboldened investor confidence.

Bernanke said that the current unemployment rate may be overstating the health of the job market.  He also said that they may keep rates low even after the 6.5% target threshold is reached.  This calmed the fears of those worried about rate hike.  As a result, the 10-year yield today has fallen back 8 basis points to the 2.60% level.  Bond funds and interest rate-sensitive stocks are rallying.

The dollar is also sharply lower today and that is boosting commodities.  Oil prices are lower near $104.90, but they have had a big run lately.  Gold prices are nicely higher to $1281.  Silver and copper prices are up sharply as well.

Asian markets were up across the board overnight, led by a 3.2% rally in China.  The Bank of Japan upgraded its assessment of the economy.  The Bank of Korea held rates steady at 2.50%.  And Australia's unemployment rate ticked a notch higher to 5.7%.

Europe's markets are also higher today.  Bundesbank pres. said the current economic outlook warrants low rates.

All S&P sectors are higher today.  Among industry ETFs, homebuilders are leading the early action while financials are lagging so far.

The volatility index is down to the 14 level.  We have been highlighting any move towards the 15 level as a good sign for stocks, and since the VIX started to move down towards and below this level it has coincided with a big rally to new highs in some of the indexes.

Trading comment: I am surprised that Bernanke's comments spurred such a strong reaction, but that has been par for the course this year.  Any moderately positive news has been met with buying demand for stocks.  The S&P 500 touched 1670 today and is now within striking distance of its highs at 1687.  The Nasdaq hit new highs today.  Historically the market has rarely rallied to new highs throughout the summer without a correction.  But we did have a 7.5% pullback in June, and maybe that is all we are going to get this time around.  Its tough to buy new positions ahead of earnings reports, so tread carefully.  But we continue to look for opportunities to add to.

Waiting For The Bernanke Reaction

Markets are mixed in early trading.  The Nasdaq is slightly positive while the S&P 500 is down a little.  Bernanke is set to speak today, and it is likely that he reiterates the same tune-- that any tapering of asset purchases is dependant on the incoming economic data.  The question is how will the bond market react?

Recent comments from the Fed have been mixed, with some hinting that QE will continue while others think the tapering could happen soon.  Bond yields rose sharply in the last 2 months on fears of higher interest rates in the future.  As bond fund investors sensed losses, the selling accelerated and created swift declines.  So it will be interesting to see if Bernanke's comments today strike any different chord and if it leads to selling in bondland regardless.

Crude oil is higher again today after reports about a well leak off the coast of Louisiana.  Crude oil is trading near $105.70, a 14-month high.  Consumers might soon begin to notice the recent rice in oil prices, and it remains to be seen if this hurts consumer spending which would slow the economy.

Asian markets were mixed overnight.  China bounced 2.2% after rumors surfaced that the PBOC might cut its reserve requirement ratio after trade data was released.  The trade data showed China's exports fell -3.1%.  But the govt has been reluctant to ease monetary policy lately.  Elsewhere, the Bank of Thailand held its key rate unchanged at 2.50%.

Europe's markets are slightly lower today after Standard & Poors downgraded Italy's sovereign rating to BBB from BBB+.  As a result the Italian 10-year yield rose 5 bps to 4.46%.

Our 10-year yield is slightly higher to 2.66% ahead of Bernanke's speech.

The volatility index is up 1% but still below the 15 level near 14.50.

Trading comment: Most market commentators I hear are still skeptical of this market, with some calling for another top in July and then a correction.  The market loves to climb the proverbial wall of worry, so nothing would surprise us here.  The next leg of the market could be driven by how earnings reports and corporate guidance start to come in.  Earnings season kicks into high gear next week.  The recent rally in the market has come on low volume.  So either that is just a sign of summer trading volumes being lower or it means there is a lack of conviction behind the recent buying.  We haven't made any big changes to our allocations, and continue to view equity weakness as an opportunity to add to the growth side of balanced accounts.

Getting Ready For Earnings Season

Markets are higher again in early trading, taking their positive cues from overseas markets.

There hasn't been much in the way of market moving news this morning.  There was no real economic data released, and the only big earnings report last night was Alcoa, which is trading down a bit today but isn't a big market mover.

IBM was downgraded this morning which is holding back the Dow a bit relative to the S&P 500.  Separately, ISRG lowered its guidance and that former growth darling is down $85 (-17%) today.

On the upside, FedEx is up 7% this morning and boosting transport stocks.  There is some speculation of a big investment from Bill Ackman, but it hasn't been substantiated.

Asian markets were higher overnight.  Chinese CPI showed a year-over-year gain of 2.7%, which was above expectations.  A State researcher said that Chinese GDP in Q2 might be below the 7.5% target.

Europe's markets are also higher.  An ECB member said that their bank mechanism could recapitalize banks if needed, and also that another LTRO program could be possible.  In Portugal, the deputy prime minister said conditions for meeting the terms of the bailout agreement are in place.

The dollar is higher again and commodities are mixed.  Oil prices are lower near $102.90 and copper prices are down also.  But gold is higher to $1248.  Silver and ag prices are higher also.

The 10-year yield is easing back a little more to 2.62%.  Bernanke is set to speak later this week, which could add to the recent volatility in bond yields.

The volatility index has moved below the 15 level to 14.28 right now.  This is good news for the bulls and increases the likelihood that this rally could last.

Trading comment: The S&P 500 is adding to its distance above its 50-day average.  It is now very close to testing the June highs at 1654.  Volume hasn't been anything to write home about on this latest advance, but that has been the story for awhile now.  Earnings season starts to pick up this week, so it's risky to add to new stocks or existing positions ahead of earnings reports as this earnings season could contain more surprises than recent quarters.  Expectations have been ratcheted down in terms of what kind of earnings growth we are going to see overall.  But hopefully that has lowered the bar to some extent.

KAM Advisors has long positions in IBM, FDX

Monday Morning Musings

There isn't much in the way of market moving news this morning, but investors have returned from the July 4th weekend in a buying mood.  The Dow is up over 100 points in early trading.

Bond yields saw a big spike higher on Friday after the better than expected jobs report.  Today the 10-year yield is easing back 5 basis points so far to 2.66%.

Asian markets were down across the board overnight.  China fell -2.4% despite the overnight SHIBOR rate declining further to 3.25%.  Citigroup became the latest firm to lower its growth forecast for China in 2013 to 7.4% from 7.7%.

Europe's markets are higher after the EU-IMF panel issued a statement saying that Greece has made important progress but remains behind in some areas.  This assessment sounds less bearish than the prevailing sentiment in recent weeks.

The dollar is lower today and commodities are mostly higher.  Oil prices are down a bit, but still at high overall levels near $102.75.  Gold prices are higher to $1233.  Silver and copper prices are higher as well.

Despite the strong gains in the market in early trading, traders seem worried about downside protection as the volatility index is slightly higher on the day.  It broke below the 15 level on Friday and today is back above that level at 15.11 so far.

Trading comment: This morning's early buying is pushing the S&P 500 convincingly above its 50-day average.  This could serve to further embolden bulls as we head into earnings season.  The next area of resistance to watch would be the SPX 1654 level that marked the highs in June.  From there we would be looking at the yearly highs of 1687 reached back in May.  Although we thought the market could spend more time in correction mode, the recent uptick in bearish sentiment may have helped the market bottom quicker than normal, which is basically the pattern we have seen all year.  It is rare to see the market continue to rally to new highs through the summer, but that doesn't mean its impossible.  One of our key investment tenets to remember is 'Expect the unexpected in the market'.

Strong Jobs Report Evokes 'Taper' Worries

The markets have been volatile this morning.  The stock market opened sharply higher after the strong jobs report, but quickly gave up all of those gains and faded back to the flat line.  Since then it has started to move back into positive territory. 

Nonfarm payrolls rose by 195,000, well above expectations of 166,000 gains.  But the unemployment rate ticked a notch higher to 7.6%.  The strong jobs report caused interest rates to spike as traders fear that the improving employment picture makes it more likely that the Fed will begin to taper its asset purchases sooner rather than later (maybe September?).

Bond yields spiked with the 10-year rising 17 basis points from Wednesday's close to 2.69% currently.

That's a very big one-day move in bond yields, and as can be expected interest-sensitive areas are getting hit by aggressive selling.  REITs (IYR) are down by -2.4% so far while utilities (XLU) are down 1.0%.  On the flip side, regional banks (KRE) are up 2.0% and biotechs are 1.2% higher.

Asian markets were higher overnight.  Goldman Sachs lowered its growth forecast for India for 2014 from 6.4% to 6.0% and 2015 as well.

Europe's markets are higher right now after the ECB left rates unchanged.  Draghi said that key rates will remain at or below current levels for an extended period of time.  Sounds like he's taking a page from the Fed book.  Separately, the IMF lowered its forecast for Italy and said the ECB should engage in direct asset purchases.

The dollar index is sharply higher on today's rate spike and that is weighing on most commodities.  Oil prices are higher near $102, but gold prices are weak again back down near $1212.  Silver and copper prices are also down sharply.

The volatility index is lower and hovering near the 16.0 level.

Trading comment: We have said to watch the key 50-day averages.  Today for the 4th time in the last week the S&P 500 rallied up to its overhead 50-day and then reversed lower.  Normally the more times you test a resistance level the closer you are to seeing a successful retest.  Volume is also running lighter than normal on this holiday shortened week, so we might have to wait until next week to see a more definitive move either above this 50-day line or away from it signaling the market has more work to do in correction mode before another rally is in the cards.  We are not making any big moves today. 

Global Turmoil On The Rise

Markets are mixed in early trading amid headlines pointing to escalating global turmoil.  The Egypt situation is quickly coming to a head.  Oil prices have topped $100 for the firs time in many months as worries grow that the political unrest in Egypt could affect the Suez Canal which would affect oil shipments from the Mideast.

Europe's markets are also lower across the board after a flare up in Portugal.  4 key govt officials have resigned or are expected to.  The country's benchmark 10-year yield spiked 126 basis points to 7.72%.  And Portugal's stock market is lower by more than 5% today.

We also have the continued concerns in China, where the services PMI data last night showed a further slowdown in economic activity.  India's PMI also fell to a 2-year low of 51.7.

The odd thing is that our stock markets aren't down more.  As of this post, the Dow is solidly in positive territory.  Optimists would probably point out that this is a positive sign that our markets have begun to decouple somewhat from Europe.  Others might say that our markets remain a bit complacent in the face of rising global tensions and slowing economic activity (Asia).

Our services PMI also fell to 52.5 this morning from 53.7 in May.  But the ADP employment report showed the private sector added 188k jobs in June, which was above expectations.  This report doesn't always correlate that well to Friday's govt payrolls report, so we will have to wait to see how that comes in.

The 10-year yield is flat near the 2.47% level.  And the volatility index touched the 16 level but bounced to 17 today before falling back closer to 16.50 currently.

Trading comment: The S&P 500 is right in the middle of an important range.  Yesterday it again failed to get above its 50-day average near 1624.  And recent support has come in around the 1600 level.  Right now the SPX is smack in the middle of those two hovering near 1612.  So it looks like if the SPX can get back above the overhead 50-day that would embolden the bulls to get aggressive again.  But if we can't hold that 1600 support level, then a more defensive posture remains in order.  I don't think its necessary to make big bets in advance until we see how this plays out. 

Still Testing The Overhead 50-Day

The markets are higher again in early trading.  Yesterday the S&P 500 tested its overhead 50-day average but turned lower from there and closed around its mid-point of the day's trading range.  This morning it is once again testing that overhead 50-day average near SPX 1624.  Ditto the Dow and the Nasdaq 100.

The big news this morning was the EU and IMF telling Greece they have 3 days to prove it can fulfill its bailout conditions or risk not receiving its next tranche of aid.  Something tells me that this is going to be an ongoing issue for years with Greece.

The news has most European markets trading lower.  And Asian markets were mixed overnight.  The Reserve Bank of Australia held rates steady at 2.75%, but left the door open to rate cuts.  And Hong Kong retail sales grew less than expected at 12.8%.

The dollar is a little higher today leaving commodities mixed.  Oil prices are higher near $98.85 while metals are lower.  Gold prices are down to $1247 after yesterday's rally.  Silver and copper prices are also lower.

The 10-year yield is easing back below the 2.5% level to 2.48% currently.  And the volatility index has fallen back below the 16 level to 15.98 at present.  The declining VIX is a bullish sign if it can continue.

Trading comment: Three of the major indexes are still testing their overhead 50-day averages.  If they are able to close above them and stay there for a few sessions it would increase the likelihood that the market can make a stab at its yearly highs reached in May.  But that is definitely not a given.  It is also very possible that the market could continue to chop around in the summer months.  Second quarter earnings season starts soon and will surely color the landscape.  Our assessment is that expectations are running fairly low as earnings estimates have been trimmed in recent weeks.

Monday Morning Musings

Markets are nicely higher on the first day of the new quarter, with the Dow up +150 points in early trading.  Of course, its still very early in the day so anything can happen by the close. 

There doesn't seem to be much news moving the market today, as it appears more like new money being put to work as the new quarter begins.  ONXX is up 50% after rejecting a takeover offer from AMGN.  And AAPL is up 2.8% afer reports that it registered the iWatch trademark in Japan.  It also got an upgrade and a $600 price target from Raymond James.

Asian markets were mixed overnight.  Japan was 1.3% higher after the economy minister said that the country's real economy is "clearly recovering".  In China, the HSBC manuf. PMI ticked down to 48.2 from 48.3, a level that points to continued contraction in the manuf. sector.

European markets are higher today.  Eurozone manuf. PMI rose to 48.8.  Most countries PMI indexes rose except for Germany which ticked down to 48.6.

After an 8-day win streak, the dollar index is slightly lower today.  That is helping most commodities.  Oil prices are higher to $98.  Gold prices are up near $1241.  And copper prices are bouncing sharply.

The 10-year yield hovered near the 2.50% level most of the first hour of trading.  It is currently at 2.49%.

The volatility index is 4.2% lower to 16.15.  The VIX has moved sharply lower since last week's spike near the 22 level.

Trading comment: We have been watching the overhead 50-day averages to see if they act as resistance on any bounces.  Right now the S&P 500 is up exactly at its 50-day at the 1624 level.  So this is a key test.  Sometimes it makes sense to look at some of the other indexes to see how they are trading in relation to their respective 50-day averages.  The Nasdaq, S&P mid-cap, and Russell 2000 are all above their 50-days.  So that lends itself to the notion that the S&P 500 will be able to lift itself above its 50-day as well.  Lots of traders are looking for more of a correction in July.  But investor sentiment is already showing some bearish readings, so from a contrarian perspective the market could look to frustrate the bears once again.  We should know fairly soon.

KAM Advisors has long positions in AAPL