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Market Update

Stocks Looking Up After Closing the Books on Ugly Q2

July 1, 2015

Bulls have moved on, apparently. It’s all sunshine and roses to start a new quarter with stocks pointed higher in early action. Glass-half-full participants choose to believe Greece can get the help it needs (more on that below). Bond traders are of that mindset too apparently, driving down bond prices and pushing the benchmark 10-year yield back up to 2.43% early Thursday.

What is certain, the book is slammed shut on Q2’s worst performance since 2012. And at the half-year mark, the S&P 500 (SPX) is 0.2% higher, the Dow Jones Industrial Average (DJIA) is 1.1% lower, and the tech- and bio-tech heavy Nasdaq Composite (COMP) is up 5.3% so far this year.

Chartists are watching SPX 2075 (yep, again). A close above that line could re-energize the bulls. Keep an eye on the CBOE Volatility Index (VIX). It’s made some tracks over the past few days, including a push back toward 19. VIX presumably might pull back if higher overall stock trading on Thursday dulls demand for short-term volatility hedging. But…Thursday brings the pre-holiday, early release of the typically market-moving employment report. Even the slimmest risk of a disappointing number in that report could prop up demand for VIX for now (figure 1).



The CBOE Volatility Index (VIX), which tracks the implied volatility priced into SPX options, continues to post wide swings as traders react to Greek and other international market developments, while awaiting Thursday’s release of the monthly U.S. jobs report. Data source: CBOE. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Greece: More Drama. The Financial Times says Greek Prime Minister Alexis Tsipras is reportedly ready to accept nearly all of the conditions in a new bailout deal proposed over the weekend. Tsipras is due to address his nation later Wednesday. Stay tuned, but be mindful that market shocks shouldn’t knock you from your game plan

When Can You Start? Private-sector employers added 237,000 jobs last month, ADP reported Wednesday, in a report that can set the tone for the broader government-issued jobs report. Economists polled by MarketWatch expect the government's report (hitting at 8:30 ET Thursday) to show that non-farm employment rose by 225,000 jobs last month, compared with a May gain of 280,000 jobs. Still on tap: auto sales and construction spending data —two potentially important pieces to the consumer-spending puzzle.

Insurance M&A. The broader stock market could find some underlying support from deal buzz. Chubb (CB) is a strong early gainer after Ace (ACE) detailed plans to buy the fellow insurer in cash and stock deal valued at $28.3 billion. The deal is expected to immediately boost Ace’s per-share earnings and book value, and to generate $650 million savings; its shares were also higher.

Good trading,

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