The E-Mini S&P 500 failed to achieve Friday's high of $1342.00 as news from the Eurozone circulated that Greece is running out of time. The question is whether it was an exhaustion rally or a market that simply needed a pause.
The US has had some extremely positive, (even if questionable) data such as the unemployment rate dropping to 8.3 % last Friday. Of the 290 S&P 500 companies reporting, 60% reported earnings exceeding expectations. The market lacked news today and what took center stage were the Greek bailout talks.
The pressure is mounting for the Greek leaders to agree on the conditions of a $130 billion euro bailout. The troika, made up of the International Monetary Fund, European Union and the European Central Bank wanted 15,000 public sector jobs cut this year and a total of 150,000 in job cuts through 2015. They also asked that the state run pension system be trimmed to keep it financially viable in the coming years.
The Greek banks must also be recapitalized perhaps requiring $40 billion euros as they hold Greek government bonds. It is hoped they can be kept independent. It is thought that the banks may be recapitalized through common shares perhaps without voting rights, but nothing has been concluded on the subject. Greece's economy makes up about 2.5% of the Eurozone and its unemployment has risen 18.4% which makes it difficult to discuss cuts in front of protests of its people particularly in front of an election.
German Chancellor Merkel has grown impatient with the delay in the talks as Germany would absorb most of the bailout costs.The EU officials declare that the full package of both conditions and funds must be agreed upon by February 15th in order to go through the legal channels and obtain parliamentary approval to acquire the bailout money. The bond redemption of $14.5 billion euros is for March 20th and in order not to default, the money must be in place. German Chancellor Merkel and French President Sarkozy have proposed setting up a separate account for Greek debt payments to offer security for creditors. The clock is ticking, but it is hoped that the deal is struck in time and the market will overlook it until the deadline is reached.
On the stock side: JP Morgan Chase and Co. (JPM) was down 0.37 % to $38.14. Citigroup Inc. (C) was down 0.72 % to $33.29. Bank of America (BAC) was up 1.66 % to $7.93. Alcoa Inc. (AA) was down 0.23 % to $10.74. Boeing Co. (BA) was down 1.15 % to $75.50. Caterpillar Inc. (CAT) was down 0.14 % to $113.78. General Electric Co. (GE) was up 0.16 % to $19.05. Halliburton Co. (HAL) was up 1.55 % to $37.40. Hewlett Packard Co. (HPQ) was down 1.07 % to $28.76. SPDR Select Sector Fund - Financial (XLF) was down 0.48 % to $14.65.
E-Mini S&P 500 Chart.
click to enlarge
Tuesday, what to expect: We maintain a bullish bias unless the E-Mini S&P 500 penetrates $1297.00. Tuesday, we anticipate an inside to higher day. Monday's range was $1340.50 - $1330.25. The market settled at $1339.00. Our comfort zone or point of control for this market is $1336.50. Our anticipated potential range for today's trading is $1348.50 - $1322.50.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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