Posted on June - 25 - 2011

Better-than-Expected Data May Rekindle Hopes

– The major U.S. index futures are pointing to a slightly higher opening on Thursday, with the weakness was mitigated by two economic reports released earlier in the day. Jobless claims fell more than expected and housing starts rose by a little more than expected. Nevertheless, the improvement suggested by the data is not strong enough to warrant a move to the upside. A manufacturing data to be released later in the day and the developments on the Greek debt front may dictate the market movement. If the Dow holds support around 11,864, there is a possibility that the markets could stem the slide.

Stung by bleak economic data and European debt concerns, the major U.S. averages retreated sharply on Wednesday. After moving notably lower at the open, the averages saw some consolidation before accelerating to the downside in mid-day trading and closing firmly in the red.

The Dow Industrials ended the day down 178.84 points or 1.48 percent at 11,897 and the Nasdaq Composite Index receded 47.26 points or 1.76 percent before closing at 2,631. Meanwhile, the S&P 500 Index ended at 1,266, a drop of 22.45 points or 1.74 percent.

All thirty of the Dow components closed lower, with Alcoa (AA), Bank of America (BAC), Caterpillar (CAT), Chevron (CVX), Home Depot (HD), JP Morgan Chase (JPM), Microsoft (MSFT), Pfizer (PFE) and Exxon Mobil (XOM) retreating sharply.

Among the sector indexes, the NYSE Arca Oil Index fell 2.53 percent compared to a near 2 percent drop by the Philadelphia Oil Service Index and a 2.25 percent retreat by the Dow Jones U.S. Basic Materials Average. Additionally, the NYSE Arca Securities Broker/Dealer Index lost 2.27 percent, the Philadelphia Housing Sector Index declined 2.59 percent, the Philadelphia Semiconductor Index moved down 2.04 percent, the NYSE Arca Software Index receded 2.56 percent, the NYSE Arca Internet Index slipped 2.31 percent and the NYSE Arca Networking Index declined 2.78 percent.

The technical picture has become bleaker, with the Dow’s 21-day moving average threatening to break below its 100-day moving average. Key support lies around 11,864, 11,769 and its 200-day moving average of 11,716. Overhead resistances are around its 100-day moving average (12,269), 21-day moving average (12,267) and 50-day moving average (12,420).

The New York Federal Reserve’s survey showed that manufacturing activity in the New York region contracted in June. The headline general conditions index based on the survey fell to -7.8 in June from 11.9 in May, dropping to the worst reading since November. The order backlogs index slipped to 0 from 9.7 and the employment index declined 14 points to 10. On a more negative note, the 6-month outlook index fell to 22.5 from 52.7 in May.

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