Quick Look

The market is flattish in early trading, with not a lot in the way of market moving news out this morning.

Bernanke gave a speech yesterday that contained little new information, and little in the way of encouraging commentary. Most of it focused on the below average rebound the economy has experienced thus far, and the need for the Fed to keep its foot on the gas pedal.

The World Bank cuts its 2011 forecast for global growth, but they are a little late to the party in this regard so this should not be viewed as a revelation.

Eurozone GDP was released, and came in at 0.8%. That has done little to inspire investors overseas, and Europe's markets are lower today. Overnight, action in Asia was mixed.

The dollar is higher today, which is weighing on gold prices. Gold has fallen back to $1536. But oil prices are higher to $100.70 after OPEC decided not to raise production levels yesterday.

The 10-year yield is back below the 3% level, currently 2.96%. And the VIX continues to hover above its 50-day average, currently 1.5% lower near 17.80.

Trading comment: Yesterday's action was disheartening for those looking for a bounce. It also shows why you need to be nimble in this market. The market opened nicely higher, and we proceeded to do some selling and lighten up on a few names. But by the day's end, the rally had completely faded. I still expect another bounce or two, and plan to execute the same plan as yesterday. Raise some cash, get a bit more defensive, and put ourselves in a better position to take advantage of this correction - but not until we feel it has run its full course. That requires patience, a rare commodity in today's frenetic trading environment.

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Stocks Enjoy An Early Bounce

The market is higher in early trading, after another disappointing session yesterday. There was no real market moving news this morning, so this is more of just a reprieve to the selling. It is likely a combination of dip buying and short covering.

Intl. Paper (IP) made a big for Temple-Inland (TIN) for a big premium, but the bid has been rejected so far.

Later today, Bernanke will give a speech on "The U.S. Economic Outlook", where investors will be listening for his comments and views on how things will look post-QE2, and how the Fed will continue to stimulate monetary policy.

The Treasury will hold an auction of 3-year Notes today, with more auctions to come later this week. The 10-year yield is higher today at 3.04%, and the yield curve is actually steepening. This is a good sign for those who are worried about the economic slowdown, as the steep yield curve still points to a growing economy.

Asian markets were mixed overnight. There was a report out last night suggesting that China might hike its benchmark rate again over the weekend. The Reserve Bank of Australia held its rate steady at 4.75%.

Commodities are mostly mixed, but oil prices are lower again near $98.40, and gold prices are lower also to $1542 after yesterday's gains.

Trading comment: Today's bounce looks like it is coming on relatively light volume so far. I still want to adopt a more conservative posture while this correction runs its course. I am looking to use this bounce, and any further strength, to lighten up on positions, raise cash, and implement some hedges. If this correction follows the normal course, it will have bounces along the way, but at some point we could test the March lows at which point bearish sentiment will likely spike higher. That could present another solid buying opportunity. But let's not put the cart before the horse.

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Monday Morning Musings

After 5 straight down weeks, the market has opened lower again. That said, I still feel like a bounce is in order this week.

Financials are very weak this morning, after banks sold off hard in Europe following pessimism over any Greek bailout and the potential hit euro banks could have to take.

There has been no major corporate or economic news this morning to move the markets, so catalysts are lacking. The ASCO meeting over the weekend will keep the focus on drug and biotech stocks in the near-term. And the Apple (AAPL) developers conference will be the big news later today, where CEO Steve Jobs is expected to make an appearance.

Asian markets were mixed overnight; Hong Kong and Shanghai were closed, but Japan was lower after Tokyo Electric Power could see losses of up to $7 billion and may be looking at bankruptcy protection.

The dollar is up slightly today, while oil prices have fallen back to the $99 level. Gold prices are higher, topping $1550 again.

The 10-year yield is up near 3.02%; and the volatility index is 2% higher to 18.31.

Trading comment: The market feels very heavy this morning, but I still expect a lift this week. The put/call ratio hit an extremely high level of 1.24 on Friday, and averaged 1.06 for the week. That's a pretty extreme bearish level. The ISEE sentiment index was equally bearish. So after 5 down weeks, and the markets back at oversold levels, I would look for a reprieve.

That said, the indexes remain below their 50-day averages, QE2 is ending, and the summer slowdown is upon us. So I would look to use any upcoming weakness to sell or trim non-core positions, and continue to build up a more defensive posture that will help investors weather continued choppiness in the market.

long AAPL

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Payrolls Data Disappoints Investors

The market is lower in early trading, but well off its opening lows after a disappointing jobs report before the open.

Nonfarm payrolls for May increased by only 54,000, far less than the 169,000 economists were looking for. Private payrolls increased by 83,000, also less than half of what was expected. And the unemployment rate ticked higher to 9.1%.

After this report came out, the futures market took a big hit, and when I left the house this morning the Dow was expected to open down around 140 points. But that market the low for the day so far, and soon after the market opened, another economic release came out that was fairly positive.

The ISM Services Index for May came in at 54.6, which was better than expected and up from 52.8 in April. Given that two-thirds of our economy is service-based, this is a pretty positive report for the economy.

As such, the market bounced, and currently the markets have recouped about half of their earlier losses. It is still early, so we will have to see how it goes into the close today ahead of the weekend. I wouldn't be surprised to see some short-covering into the close.

The 10-year yield briefly dipped as low as 2.95%, but has since bounced back to 3.02%.

Oil prices have dipped below the $100 level, while gold prices are higher to $1543.

Asian markets were mixed overnight, with some chatter about a possible rate hike in China over the weekend.

Trading comment: The markets are set to post their 5th consecutive weekly loss. I expect stocks to bounce next week, so I am going to buy some things for a trade. But as long as the major indexes remain below their 50-day averages, I will remain in a big-picture defensive mode. The Traders Almanac says that June is the second worst month of the year for stocks historically, and I have my own hesitations about the summer doldrums. So while it's always okay to try to take advantage of the market's trading ranges, now is not the time to get aggressive.

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Quick Look: Stocks Steady In Early Trading

The market is slightly higher so far this morning, after a couple of positive economic revisions.

Productivity for Q1 was revised higher to 1.8% (from 1.6%) and unit labor costs were revised lower to 0.7% (from 0.9%). With unit labor costs this low, and continued significant excess capacity in most parts of the economy, it's hard to see a big pickup in inflation right around the corner.

Asian markets got whacked overnight, following the large selloff yesterday in U.S. markets. The dollar is lower today, but that isn't helping commodities much. Oil prices are down slightly, struggling to hold the $100 level, while gold prices are giving back yesterday's gains, trading near $1537.

The 10-year yield is trying to get back to 3.0%; and the VIX is lower to 17.98.

Trading comment: Yesterday's negative action pretty much negated any positive indications from the previous day. The S&P 500 is back below its 50-day moving average, which means we are in a more defensive posture for the time being. Bearish sentiment has started to build, but I suspect its going to take more frustrating selloffs to bring out more bearishness, such that sentiment gets back to the point that the market can bottom and launch on another more sustainable rally. For now, I expect choppy action to continue. On a positive note, its nice to see AAPL holding above its 50-day average.

long AAPL

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More Signs Of Economic Slowdown

The market is under selling pressure this morning, after a handful of weaker than expected economic reports has investors questioning the strength of the economic recovery.

The ISM Manufacturing Index came in below expectations at 53.5, well below last month's reading of 60.4, and the lowest level since Sept. 2009.

Also, the ADP Employment report showed that private payrolls in April increased by just 38,000, vs. consensus for 170,000 payrolls. That is quite a discrepancy, and has caused several brokerage firms (including Goldman and Credit Suisse) to lower their estimates for Friday's jobs report.

Asian markets were mixed overnight. China's manufacturing survey also eased to a nine-month low (52.0), while Australia's GDP contracted -1.2% in the first quarter, as the Queensland flooding affected the nation's economy. They expect a strong rebound in 2H11.

The economic data has pushed the 10-year yield below the 3% level, currently 2.98%. And the volatility index (VIX) has jumped +8% this morning to 16.65.

Financials are getting hit the hardest this morning, down -2.1%. Large-cap tech is actually faring quite well, with several notable names bucking the weakness so far, including: AAPL, GOOG, VMW, MELI, PCLN, APKT, and CHKP.

Oil prices are lower to $101.75, while gold prices are up a tad near $1537.

Trading comment: It looks like yesterday's strength could have been more month-end window dressing than anything, and that today reality has sunk back in. Some of the worry certainly has to do with QE2 ending in June, and the worry about the economy growing on its own, post-stimulus. But we have had the same concerns each of the last 2 summers, with the economy picking back up later in the year. I don't want to be pollyannish about this, but right now I am looking at the data as simply lumpy and uneven, as opposed to joining the camp looking for a new downturn.

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