Political Uncertainty

The summer market not only has to deal with the political uncertainty of US trade negotiations but now also has to worry about the future of the Euro as Italian uncertainty shakes the market.  With the newly elected officials struggling to form a government Italy may face another election that threatens the stability of the Euro.

All this political uncertainty could make for a challenging summer with prices whipping around in a politically generated storm where the outcome has far-reaching market effects.  Yesterday the faced a triple point gap down and selloff and this morning the futures suggest a triple point gap up at the open.  Plan your risk carefully and prepare for the possibility of more turbulence in the weeks to come.

On the Calendar

The Wednesday Economic Calendar gets going at 8:15 AM with the ADP Employment Report consensus at 187,000 new jobs created in May.  The ADP has been running stronger than actual payrolls.  AT 8:30 AM we have tow potential market-moving reports, GDP & International Trade in Goods.  Forecasters expect the GDP to come in at 2.2 percent with consumer spending up slightly and the GDP index unchanged at 2.0 percent.  International Trade in Goods deficit is expected to widen to a consensus $71.0 billion in April vs. $68.3 in March reading.  The Beige Book at 2:00 PM which comes out 2-week before the FOMC will wrap up the potential market-movers for today.  Other reports today include Mortgage Applications, Corporate Profits, Retail inventories, Redbook, and Farm Prices.  Keep in mind that the Fed will issue a proposal to modify the Volcker Rule which curtailed proprietary trading banks after the financial crisis.

We have 56 companies reporting earnings today to keep traders on their toes.

Action Plan

Political uncertainty in Italy shock the markets on Tuesday sending banking stocks sharply lower with the stability of the Euro in question.  It would wise to expect further shock waves to the market similar to those we experienced just a couple years ago with Greece.  Unless they sort this out quickly, we could face a turbulent summer.

This morning the Dow Futures are pointing to a gap up open of more than 120 points as the market whips around in political winds generated in the US and now across the pond.  The VIX rose sharply yesterday facing uncertainty on multiple fronts.  Plan your risk carefully!

Trade Wisely,

Doug