[MM_Member_Data name=’firstName’],
U.S. markets opened lower for a second-straight session and ahead of Fed Chair Jerome Powell’s early morning testimony, which was fairly optimistic on the economic and policy fronts.
The rebound afterwards lasted into the second half of action with the major indexes closing in positive territory.
Earnings are back in focus following mixed 2Q results from various sectors and will pick up steam throughout the week.
Volatility plunged 6% and is again pushing multi-month lows with near-term resistance and all-time highs for the market still in play.
The Dow was up 0.2% after closing in positive territory for the 4th-straight session while reaching a high of 25,155. Mid-June resistance at 25,250-25,300 remains in play following the 3rd-straight close above the 25,000 level.
The S&P 500 soared 0.4% following the late day run to 2,814.
January resistance at 2,825 is back in play on continued closes above 2,800 and a level that has held in 2 of the past 3 sessions.
The Nasdaq jumped 0.6% after testing an intraday an all-time high of 7,867. The 118-point rebound off the low was a very bullish signal with blue-sky territory towards 7,950-8,000 on continued momentum.
The Russell 2000 suffered the least amount of damage on the open while rebounding 0.5% afterwards and trading to a high of 1,690.
Fresh resistance at 1,700 held with continued closes above this level keeping lifetime highs north of 1,708 on the radar.
Materials and Consumer Staples paced sector strength after rising 1.3% and 0.9%. Technology gained 0.8%.
Real Estate and Energy led sector laggards after falling 0.7% and 0.4%, respectively. Utilities were off 0.1%.
Global Economy – European markets were higher across the board after no surprises in economic data.
Germany’s DAX 30 rose 0.8% while UK’s FTSE 100 and the Belgium20 climbed 0.3%. The Stoxx 600 Europe and France’s CAC 40 advanced 0.2%.
Eurozone June new car registrations rose 5.2% year-over-year at 1,569,067 and year-to-date are up 2.9% at 8,449,247.
The UK ILO unemployment rate was unchanged for the three months through May at 4.2%, matching expectations.
UK May average weekly earnings were up 2.5%, marching forecasts. May weekly earnings ex-bonus were up 2.7%, also matching expectations.
Asian markets were mostly lower as trade tariffs took a back seat to ongoing political blabber.
Hong Kong’s Hang Seng sank 1.3% while Australia’s S&P/ASX 200 and China’s Shanghai fell 0.6%.
South Korea’s Kospi slipped 0.2%. Japan’s Nikkei gained 0.4%.
China’s outbound direct investment in the first half of the year rose 18.7% compared with the same period a year ago to $57.18 billion.
In the January-May period, China’s ODI increased 38.5% from a year earlier to $47.89 billion, according to official data
China June new home prices rose 1.1% and are up 5.8% year-over-year.
Industrial Production bounced 0.6% in June, after falling 0.5% in May. Meanwhile, Manufacturing production was up 0.8%, after dropping 1% in the prior month with vehicles and parts up 7.8%.
Machinery production rose 0.7%, while computer, electronics production were up 1.5%. Utilities declined 1.5% and Mining climbed 1.2%.
The NAHB housing market index was unchanged at 68 in July, matched expectations. The present single family sales index was steady at 74 while the future sales index slipped 2 points to 73.
The index of prospective buyer traffic rose 2 points to 52. According to the report, solid job gains are being offset by elevated materials costs that are pressuring developers.
Redbook Store Sales were up 3.3% for the year in the week ending July 14th.
Market Sentiment – Fed Chairman Jerome Powell focused on the good news in the economy in his prepared testimony before the Senate Banking Committee.
He highlighted the robust conditions in the labor market, rising after-tax incomes, and optimism among households, all of which have lifted consumer spending.
He added business investment has grown at a healthy rate too, while overseas gains have supported U.S. exports and manufacturing.
Looking ahead, Powell said the FOMC expects the job market to remain strong while inflation stays near 2%. He reiterated that the best way forward is to keep gradually rising the federal funds rate.
On the yield curve, he said he monitors it for insight on the neutral rate and didn’t show any worry that the flattening concern for a recession.
As far as trade, he said countries without barriers tyically do better, while those with tariffs usually do worse.
However, he went on to say there could be some benefit if the trade negotiations cause a decline in global tariffs.
Powell said the U.S. needs to come up with a plan for government-sponsored enterprises, or GSEs, as they are among the big unfinished issues from the 2008 financial crisis.
He said removing the housing-finance system from the government’s balance sheet is very important.
The iShares 20+ Year Treasury Bond ETF (TLT) tested a high of $122.39 shortly after the open with lower resistance at $122.50-$122.75 holding.
Continued closes above the latter would be a bullish development for a run towards $123-$123.50.
Support at $121.75-$121.50 held on the fade to $121.90 afterwards with a close below the latter signaling additional weakness.
Market Analysis – The Russell 3000 Index ($RUA) has been making higher highs over the past 5 sessions with Tuesday’s peak reaching 1,674.
January resistance at 1,675-1,680 held with continued closes above the latter getting 1,690-1,700 and fresh all-time highs in play.
Rising support is at 1,660-1,655. A move below the latter would be a slightly bearish development with risk towards 1,640-1,635 and an up trending 50-day moving average.
RSI is back in an uptrend with resistance at 65-70. A move above the latter would signal continued strength and breakout territory.
Support is at 60-55 with a move below 50 being a warning signal for additional weakness.
The Spider S&P Retail ETF (XRT) extended its winning streak to 3-straight after making a late day push to $50.03.
Fresh resistance at $50-$50.25 held with continued closes above the latter being a bullish signal for continued strength.
Support is at $49.50-$49.25 with a move below the latter likely signaling a short-term top. The 50-day and 200-day moving averages remain in solid near-term and longer-term uptrends.
RSI is pushing resistance at 60.
A close above this level could led to a run towards 65-70. Support is at 55-50 with a close below the latter being a bearish development.
All the best,
Roger.