U.S. stocks fell for a third straight session after housing data and a slashed forecast from Hewlett-Packard Co. added to fears of further economic weakness, but shares ended off the day’s lows, helped by recent strength in earnings. The Dow Jones Industrial Average closed down 68.79 points at 12,479.58, after losing almost 170 points. The S&P 500 Index ended down 0.49 point at 1,328.98, also recovering the bulk of the day’s losses. Of the three major indexes, only the Nasdaq avoided extending losses to a third session. The Nasdaq Composite Index ended up 0.9 point to 2,783.21.
Investors are concerned that the U.S. economy is in for another period of sluggish growth, much like it suffered early last summer, when the post-recession rebound should have been in full swing. That year-ago cooling contributed to the Federal Reserve’s decision to unveil a second round of extraordinary monetary stimulus, or quantitative easing. It’s a carryover of the sense that some of the recent economic data points, on a month-to-month basis, have softened. The less than robust macro economic data as of late leads investors to question the end of QE2, but we should have some more insight come the release of Fed minutes today.
Before the opening bell, the Commerce Department said housing starts dropped 10.6% to an annual rate of 523,000 in April. Economists surveyed by MarketWatch had expected a rise to 575,000.
Also, the Fed said industrial production was flat in April versus the 0.3% rise anticipated by economists.
Furthermore, there are talks of Greek debt being restructured, which should continue to pressure the Euro and dollar denominated commodities. Lower lows, and lower highs continue to be the trend across various markets, so we remain bearish.
Today’s Important Economic Announcements (GMT)
8:30 AM GBP Claimant Count Change & MPC Meeting Minutes
12:30 PM CAD Leading Index m/m & Wholesale Sales
2:30 PM Crude oil Crude Oil Inventories
5:30 PM USD FOMC Member Fisher Speaks
6:00 PM USD FOMC Meeting Minutes
11:50 PM JPY Prelim GDP q/q
Crude-oil futures bounced off 12-week lows in electronic trading Wednesday, as the U.S. dollar declined and encouraged buying in dollar-priced commodities, ahead of a key oil inventory report.
Light, sweet crude for June delivery advanced 86 cents to $97.77 a barrel on the New York Mercantile Exchange during Asian trading hours. Weak housing data, which helped inflame concerns about U.S. demand levels, contributed to the downward price pressure on Tuesday, while a trade-group report showed a weekly rise in oil supplies. The American Petroleum Institute (API) inventory report showed crude-oil supplies rose 2.7 million barrels in the week ended May 13. We are still aiming for $92.40, though for the next 24 hours, our take-profit is set at $95.54
Stop Loss: 99.12
Take Profit: 95.54
The Australian dollar eased slightly after minutes from the Reserve Bank of Australia indicated policy makers were in no hurry to resume their tightening cycle. The local currency was recently at $1.0578 against $1.0585 just before the minutes were released. The RBA’s clear tightening bias was confirmed in the minutes from the board’s May 3 meeting, though the tone lacked the urgency some quarters had been anticipating. AUD/USD is in downtrend from $1.0888, the bounce from$ 1.0505 is treated as consolidation of downtrend. Resistance is at $1.0700, as long as this level holds, downtrend could be expected to resume, and another fall towards$ 1.0400 is possible. We are bearish with caution.
Stop Loss: 1.0655
Take Profit: 1.0571
Gold continues to consolidate between $1519.55, the 50% Fibonacci retracement of the drop from the May 2 high and a rising trend line set from late January. Piercing this downside barrier would amount to a material, medium-term trend change, opening the door for protracted gold weakness over the coming weeks. Short term support and resistance line up at $1489.19 and $1505.98. Support is at $1470.37; a break of the latter will give 1451.22, where a correction is possible. Our target is set at the resistance level of $1,522.30. Long positions with relatively close take-profit are encouraged.
Stop Loss: 1,484.93
Take Profit: 1,497.11
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