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Market Update

Greece Nearer to Buying Some Time and That’s Enough for Wall Street

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June 23, 2015

You can hang a lot on hope. And it’s the hope for a short-term Greek debt resolution that’s propping up U.S. and European equity indexes. In fact, the NASDAQ Composite points higher in early action, pushing it deeper into record territory after its all-time-high close on Monday (figure 1). The broader S&P 500 (SPX) has 2130 again in its sight. That line roughly marks the top of a trading range in place since early in May.

U.S. markets have taken their cues from European stocks to start the week. Athens officials offered up a revised set of reform proposals at an emergency meeting of euro-zone finance officials Monday night. Those officials termed the plan a “positive step forward” toward striking a deal later this week, according to media reports. And for now, that’s enough to pacify Wall Street. Now, there’s some sobering reality, too. Greece owes a roughly 1.54 billion euro ($1.75 billion) payment to the International Monetary Fund on June 30. So “default risk” has never really left the conversation. Greek banks remain vulnerable, which means that European banks remain vulnerable.

Of course this all plays out as U.S. equity averages eye decent Q2 gains. Coming sessions could begin the typical late-quarter maneuvering by fund managers to build up returns. Watch, too, for sector rotation as the quarter wraps. These market machinations could stir up additional volume and volatility between now and quarter end, even leading up to the July 3 holiday market closing.

NASDAQ-record-high

FIGURE 1: RECORD TERRITORY.

The technology-heavy NASDAQ Composite hit its highest level on record Monday. It lagged the performance of the broader S&P 500 (SPX) earlier in 2015 but has turned leader. Data source: NASDAQ. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Durable Goods Data Not So Durable. Mixed? At best. But little harm for early stock action. Orders for durable U.S. goods fell a seasonally adjusted 1.8% in May, mostly because of less demand for commercial aircraft, a volatile category. Orders minus transportation increased 0.5%. And orders for core capital goods, a closely watched proxy for business investment, edged up a tepid 0.4% in May. I’m not sure this report revealed the missing consumer so stay tuned for upcoming data. For now, it’s simply one more data point for the Fed and not likely to push central bankers off track. Still up: New home sales, at 10 a.m. ET. Street forecasts peg the reading at 525,000 in May, from 517,000 in April. U.S. stocks remained higher in the wake of the data release, while Treasury yields nosed up.

See You in September? The conditions needed for the first Federal Reserve interest rate hike potentially could be satisfied "as soon as September," Fed Governor Jerome Powell said Tuesday, taking part in a Wall Street Journal panel. Is it a done deal? No. But Powell sees about a 50-50 chance of a move, depending on the economic data between now and then. The U.S. dollar gained on the remarks.

Sign of Life for BlackBerry. Device-maker BlackBerry (BBRY) is an early gainer although off its earlier levels, logging heavier-than-usual early market activity. The stock missed Street expectations with earnings but did report positive cash flow for its fiscal Q1. Investors seem to be focusing on a broad patent cross-licensing deal between BBRY and Cisco (CSCO).

Good trading,
JJ
@TDAJJKinahan

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