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U.S. Stocks Tip Higher Even as Greece Pins European Stocks, Euro Lower

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July 7, 2015

U.S. stock futures tip higher in early action although traders are reluctant to stick out their necks given the tenuous situation for the eurozone.

Greece is expected to offer a new last-ditch plan to creditors after voters took a resounding stand against tougher austerity in their weekend referendum. The policy gap could end with Greece’s exit from the group of nations sharing the euro, but several top European leaders have pledged to pursue all avenues to keep today’s eurozone intact. The White House has urged the leadership to keep Greece in the eurozone; Germany has expressed its interest to walk away.

As might be expected, the dollar rose against the euro Tuesday, the shared currency sputtering ahead of news on the next steps for Greece and its debt crisis. But a strong dollar is likely to factor into the upcoming U.S. earnings reporting season, kicking off with Alcoa (AA) after the closing bell Wednesday.

SPX-Snaps-Slide

FIGURE 1: SPX BELOW 2070.

The S&P 500 (SPX) dropped for a third straight session Monday, crossing below 2070 once again. Stocks were tipping higher in early action Tuesday. Data source: Standard & Poor’s. Chart source: TD Ameritrade’s thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

Trade Deficit Widens. The U.S. trade deficit rose 2.9% in May, mostly because our nation exported fewer aircraft and other manufactured goods. The U.S. trade gap widened to a seasonally adjusted $41.9 billion from a revised $40.7 billion in April. Currency traders care about trade figures, of course. For stock investors, the report’s biggest utility may lie with what it reveals about GDP. The trade deficit has averaged $41.3 billion in the first two months of Q2, down from a $43.4 billion average in Q1. So the trade deficit is unlikely to be a big drag on U.S. GDP in Q2 like it was in the first three months of the year.

Fed on Tap Later This Week. Greece dominates for now but will likely share the spotlight with the Federal Reserve deeper into the week. Minutes from the Fed’s latest policy meeting will be released Wednesday afternoon. There was a noticeable shift toward a fall rate hike at that meeting but let’s see what details from the meeting’s discussions might reveal. Fed chief Janet Yellen offers a speech on the U.S. economic outlook late week, a potential precursor to what she testifies to Congress the following week.

AMD Plunges: What’s Next for PCs? Advanced Micro Devices (AMD) dropped some 14% in higher-volume early trading Tuesday. The semiconductor maker lowered its sales outlook late Monday because of a weaker-than-expected PC market. Analyst notes were largely cautious although one did say Q2 was likely the bottom for the PC inventory cycle.

Good trading,
JJ
@TDAJJKinahan

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