Cross-currents to Start the Third Quarter

Tuesday recap:  Equity markets managed marginal gains Tuesday as there was a bit less vitriol from actors in the Greek theatre and stocks showed some repair from the heavy selling on Monday.

NASDAQ and Russell 2000 each had gains of +0.5%,  mildly out performing other market averages as they had through the first half of 2015.

Market internals held their own as advancing issues led decliners by slightly less than 5 to 3.  On the flip side there were still 250 new 52 week lows, 100 less than Monday.  We’ll give the new lows a “pass” for right now as it was the last day of the quarter and I don’t have confirmation that this is intraday or closing price data.

Bonds had no “flight to safety” follow through  Much had been made after Monday that the US 10 year had its largest drop in yield in at least a couple years.

Keep in mind that the 10 Year Note finished last week at 2.45%, its highest yield in 16 months.  The 10 year yield remains in an upward trending channel and yields climbing again this morning with the 10 year yield back up to 2.38%.

Economic Data is back in the spotlight leading into the holiday weekend.

Tuesday the Chicago PMI June report came in at 49.4, below consensus and more significantly, below the expansion/contraction threshold of 50.0 for the 4th time in the last 5 months.

The National ISM Manufacturing report for June will hit the wires at 10:00 AM this morning.  Consensus is for a reading of 53.2, a slight increase from the May report at 52.8.

Should the ISM report follow the trend of the Chicago PMI and drop below the 50.0 level, Bonds will likely reverse their morning losses, and the ZIRP Forever crowd will be “high fiving” into the weekend.

The May Construction Spending report is also a 10:00 AM release.  Consensus is for +0.3%, a drop from Aprils report of +2.2% which was the largest increase in 3 years.

Thursday Morning we’ll get the June NFP and employment report, a day early due to markets and Government offices being closed on Friday.   Consensus is for NFP to be in the range of +225K to +250K.  Recall that the May report came in a bit “hot” at +280K with upward revisions for march and April.

The Early Line:  European markets are rallying sharply on reports of renewed progress in negotiations between Greece and their creditors.   Again!!!  This is a very fluid situation and markets are hostage to headlines on almost an hour to hour basis.

US Equity Futures are also pointing to a higher opening a couple hours from now.  It is the beginning of a new month and a new quarter.

There is always new money coming into the market at the beginning of each month from dividend reinvestment plans and other sources.

While there has been significant technical damage done to the chart pattern of market indices and benchmark stock, It would not be surprising to see markets have a healthy bid the next couple days.

tanderson@mndpartners.com tjanderson56@gmail.com

Twitter: @TJAnderson1

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