Fears of future rate hikes and the weakening economies of China and Europe emboldened hungry bears to bear current uptrends and test price support levels in the index charts.  As a result, the Treasury Yields spiked, and the U.S Dollar reached a multi-year high, further complicating foreign economic conditions.  So who will gain inspiration today with few notable earnings, PMI Composite Flash, and New Home Sales data just around the corner?  With the VIX spiking on the fear of yesterday’s selling, expect some challenging price volatility as we wait for the market-moving economic reports later this week.

With Singapore inflation hitting a 14-year high, Asian markets closed in the red across the board overnight.  European markets trade mixed this morning, with energy prices rising and the Euro at a 20-year low.  Ahead of earnings and economic data, U.S. futures look to bounce slightly after the sharp selloff on Monday that broke the recent trend in the index charts.  Plan carefully with potentially market-moving economic data coming Wednesday and Thursday.

Economic Calendar

Earnings Calendar

We have 30 companies listed on the Tuesday earnings calendar, with more than 20 confirmed to report.  Notable reports include AAP, CAL, DKS, INTU, SJM, JD, JWM, M, MDT, PYCR, TOL, & URBN.

News and Technicals’

The Euro is trading at a two-decade low of 0.9903 against the dollar; with some speculating, it could slide much lower.  However, strategists are “definitely biased towards further euro depreciation,” says a head strategist at Citi Bank.  According to analysts, China’s power cuts this year are not likely to stretch too far beyond summer, as the conditions of this year’s power crunch differ from last year’s.  This year’s crisis is a result of two factors: “abnormally hot weather” and a lack of rainfall.  Last year, power generation plants cut back on production due to high coal costs they could not offset with fixed electricity sales, and provincial governments rationed power usage to meet yearly emissions targets.  The growing risk of a “major financial accident” that causes a market capitulation later in the year could open up opportunities for investors, according to Beat Wittman, chairman, and partner at Zurich-based Porta Advisors.  Wittman argued that until central banks were forced to begin tightening this year, monetary policy and liquidity conditions had been “too loose for too long,” and policymakers, led by the U.S. Federal Reserve, were now scrambling to restore lost credibility.  Zoom’s revenue growth slowed to 8% from 12% in the year-ago quarter, a lesser result than analysts had predicted.  The video-calling software maker blamed the strong revenue miss partly on the U.S. dollar.  Ford Motor is cutting about 3,000 jobs from its global workforce, most of which are in North America.  The cuts will include 2,000 salaried positions and 1,000 agency jobs in the U.S., Canada, and India, Ford Chair Bill Ford and CEO Jim Farley.  Treasury yields drifted slightly lower in early Tuesday trading, with the 12-month at 3.21, the 2-year at 3.33%, the 5-year at 3.17%, the 10-year at 3.02%, and the 30-year at 3.23%.

Hungry bears drove index charts sharply lower Monday, breaking current uptrends and testing price support levels that mostly held.  Additionally, the U.S. Dollar surged upward yesterday as weakening economies in China and Europe spiked treasury yields raising concerns about future rate hikes.  With a few more notable earnings and economic data from PMI Composite Flash & New Home Sales to provide some inspiration, expect price volatility.  The question to be answered will it be the bulls or bears inspired, and will support levels hold or fail?  It would be wise to plan carefully with the Durable Good number Wednesday before the bell and the GDP report out Thursday morning.  As a result, it would not be out of the question to see some choppy price conditions as we wait.

Trade Wisley,

Doug