Bearish Sentiment Could Fade As Wall Street Opens
(eToro Blog) US equities were under pressure during the last week gyrating in a tight range as commodities and currencies pushed and pulled equities up and down. Outside influences such as European debt concerns, and weak US housing data offset strong earnings data from Wal-mart and Home Depot.
Toward the end of the week, the dollar gained strength as investors re-focused on a potential Greek re-structuring of debt and the weekends Spanish elections. Spain holds local and regional elections on Sunday ahead of the national election next year. Socialist Prime Minister Zapatero has already indicated he will not seek re-election.
Peripheral yields soared on Friday with the yield on Greece's 10-year government bond rising to record levels as speculation that of a default continued to gain steam. This put pressure on the Euro, which intern had investors moving into the dollar as a safe haven asset.
During the week, economic data releases on the US housing market did not give investors a sense of comfort. Construction of homes and apartments dropped 10.6% in April to a annual rate of 523,000, compared with a month earlier, according to the Commerce Department. Home starts are down 23.9% from the same month a year ago, reflecting a market that has struggled as foreclosures drive down prices.
Existing-home sales decreased 0.8% from a month earlier to a rate of 5.05 million, according to the National Association of Realtors. March's sales pace was revised downward to a rate of 5.09 million per year. The results were worse than forecast. Economists surveyed had expected home sales to rise by 2.0% to an annual rate of 5.20 million.
As the beginning of June approaches, investors are also pondering the effects of the end to the FOMC bond purchase program. The FED QEII program, was the impetuous to the large rise in stocks beginning September of 2010, and the ending of this program could pressure stocks. Many believe this is already priced into the market, but the outcome is less than certain.
However risk aversion and debt fears have eased a bit in latest hours and now some analysts suggest the selloff of last week and the fading momentum of risk aversion could push Wall Street to end the day in the money. The S&P is yet to open at 1,333 supported around the 1,300 area and the Dow at 12,512 with support seen at 12,170.
Copyright 2011 eToro Blog
More from IBT Markets:
Subscribe to get this delivered to your inbox daily
Follow us on Twitter.
Follow us on Facebook.