EmailWith Monday's strong gains, the S&P 500 has now surged 11.2% from last Tuesday's low. It is no surprise then that the market may consolidate today, at least at the open. U.S. equity futures have held in negative territory throughout the morning, currently trading at their lows.
Tuesday's calendar is full, indicating today's session may be headline driven. Europe remains in focus.
Monday, the pledge by German Chancellor Merkel and French President Sarkozy to reach an agreement on a package of measures to stabilize the eurozone spurred the rally.
Today, all eyes are on Slovakia (no, really) as the country is the last to vote on the new, expanded European Financial Stability Facility. It also just happens to be the least likely to approve the facility, which would be used toward the second bailout of Greece.
Speaking of Greece, the so-called "troika" made positive statements this morning indicating the country will receive its next tranche of bailout loans (as part of the first aid package).
Activity may not be subdued in the U.S., however.
While the economic calendar is empty for a second day, the financial sector, which has been out in front of the market recently (both to the upside and to the downside), is awaiting the release of the Volcker Rule. After drafts were leaked in recent weeks, the FDIC will meet today to discuss this part of the Dodd-Frank Act, which would limit how banks can invest their own capital.
Separately, headlines could continue to circulate about a potential settlement between banks and states over mortgage practices and "robo-signing."
Moving to the bond market, Treasuries reopened today following the Columbus Day holiday. Despite the weakness in equities, yields have moved higher as they play catch-up. This activity precedes the first of this week's longer-maturity auctions; the sale of $32 bln in 3-year Notes.
With so much clouding the market's vision Tuesday, it is no surprise participants have taken a wait-and-see approach this morning.
--David M. Campione, CFA
Dave is an analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
