Stocks are jockeying for a fourth straight session of gains, riding high on the dovish tone set by the Federal Reserve earlier this week. The bulls are shrugging off other short-term factors, including Greece bailout uncertainty and a retreat in Chinese stocks. We’re still in the range that has book-ended trading since early May, except now we’re talking about knocking around at the top of the range, testing the high end at 2130 (figure 1).
Reminder: “Quadruple Witching” hits today. That means the big firms with market muscle may have to unwind many of their stock-versus-futures-versus-options positions, and the net result might be a bit more trading activity, which could heat up volatility especially at the open and the close.
Greece & Oil & Gold & Dollar: If you thought the Fed’s interest rate watch was the only factor in the stock market, think again. Intermarket linkages across debt, equities, currencies, and commodities continue to hang over Wall Street. In the near term, Greece’s debt troubles may cause some uncertainty for currency and oil markets, although the bulk of speculative oil investors are reportedly sidelined ahead of a potential Iranian nuclear deal and more supply due to hit the market. The dollar’s relative strength this week did send oil below $60 a barrel. As for Greece, euro-zone leaders gather again at a hastily called confab on Monday to try to clinch a deal on Greece’s bailout. Finance ministers this week failed again to bridge the gap between Athens and its lenders. And on Friday, the European Central Bank raised its emergency funding for Greek banks. Here’s an interesting sidebar: gold is up 2% on the week, even with stocks up. That divergence is worth a closer look. The shiny stuff is back above the closely watched $1200 line by a sliver. Plus: the benchmark 10-year Treasury yield could see some resistance at 2.3%.
Don’t Look Now: China in Correction: The Shanghai Composite Index on Friday recorded its worst weekly performance in more than seven years, down more than 6% Friday, down over 13% for the week, and sliding into what most industry analysts consider to be correction territory. Investors got spooked by valuations and then by the selling that hit the formerly high-flying Chinese startups this week. Other major Asian stock indexes closed the week higher.
Home Builder Delivers. KB Home (KBH) is an early gainer after the home builder beat profit and revenue estimates for Q2 and offered a pretty solid outlook. Housing is a great test to see if the steady stream of job growth is finally translating into big-ticket buying. CEO Jeffrey Mezger in a statement: "With the positive momentum we have generated across our business, we ended the second quarter with significantly higher backlog levels in each of our four regions relative to a year ago, providing excellent visibility on our deliveries and revenues for the remainder of the year.” The company is expecting "measurable" growth in revenue and deliveries in the second half, he said.
Dive In to the Market
Learn the thinkorswim® platform from those who know it best. Join daily Swim LessonsSM at 11:30 a.m. ET.