Another relatively quiet overnight session in all markets on low volume once again. Asian indices were mixed, with the Shanghai the weakest performer, down almost 2% to close near the lows of the year. European indices have been moving between flat and down 0.5% throughout the morning, with SPX futures behaving in a similar fashion. The dollar is generally stronger, particularly against the Euro (back below 1.22), and commodities are broadly lower with the exception of the grains again (corn up 4%, wheat up 3%, soybeans up 2%). Italian and Spanish sovereign yields are higher again, while U.S. and German yields are close to their lows of the year on the safe haven trade.
We have Bernanke testimony in front of Congress on Tuesday and Wednesday mornings. I expect dovishness, but I think that dovishness is also prices in. I’ll be watching silver and gold closely to see how they react. I’m still long the Jul 27 puts in SLV, which expire on Friday.
Very busy earnings week this week, though today is relatively quiet, with C the main report. Later in the week, we have AXP, IBM, INTC, and GE among the names that report that we have traded recently. GE was downgraded this morning to neutral from overweight by Morgan Stanley, saying it sees the positive catalysts for the story materializing in 2013. GE is trading down about 1% pre-market.
Since the post-European summit strong close on Friday, June 29th, both U.S. and European indices are almost completely unchanged. Very low volume has traded in that period, partly due to the July 4th holiday. Yet, even last week’s volume throughout the week was paltry, despite the start of earnings season. Asia, though, has been weaker, with most indices broadly trading lower since then. And even though the broad indices are flat, under the hood, defensives have outperformed almost all cyclical sectors since 2 weeks ago. The trend of positioning for further economic weakness continues, and I still have conviction that it portends lower stock prices over the next month.