Sensing a Stock Market Relief Rally

Morning Greek

Data Impact: +1
(Scale: -5 to +5)

Relief is a powerful market driver, and we are sensing a stock market relief rally here and maybe through the next few days. Global markets will be attuned to events in Portugal though. Should the day pass without too much trouble across the pond, a relief rally might gain steam, especially given Chairman Bernanke's testimony this morning and ECB monetary policy tomorrow. We would think the rally, should it not be impeded by an unexpected shock, would get started sooner and could prove sharper, due to less risk tied to Portugal versus Spain yesterday. Today's morning report focuses in on international activity, mortgage activity, and pending economic reports, corporate events and DC happenings - including the President's meeting with the President of Palestine and Ben Bernanke's testimony before a House committee.

"The Greek" earned clients a 23% average annual return over five years as a stock analyst on Wall Street. While writing for Wall Street Greek and others, he presciently predicted the financial crisis and housing and banking failures of the Great Recession. Visit the front pages of Wall Street Greek now to see our current coverage of business news, global financial markets, real estate, shipping, fine art, technical analysis and global affairs.

(Tickers: NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, Nasdaq: NDAQ, NYSE: ICE, Nasdaq: CIEN)

Sensing a Stock Market Relief Rally

European unrest threatens the stock market again Wednesday, as the citizens of Portugal might voice some discontent regarding austerity measures. The situation in Portugal is different than in Spain though, with the opposing political party giving its okay to the measures and due to less concern regarding pressures on unions. Also, Portugal's Parliament already took the first steps toward the passing of this legislation, and its populace have likely accepted its inevitability as a result. However, should the Portuguese react the way Greece's populace did when its Parliament voted on similar measures (charging parliament), Europe, the euro and global shares would move sharply lower. Should the day pass without too much trouble (likely), then look for another rally (barring other news).

International Market Action

Europe:

* ESTX 50: +1.17%
* FTSE 100: +0.52%
* CAC 40: +1.19%
* DAX: +1.37%
* Athex: +3.84%

Asia:

* NIKKEI 225: -1.04%
* Hang Seng: +0.69%
* S&P ASX 200: +0.09%
* CSI 300: +3.07%
* KRX 100: -0.23%
* BSE Sensex 30: +0.25%

DC Drivers

President Meets Palestinian

Expect some protests here at home as well today, as President Obama meets with the Palestinian President in Washington. Our nation is somewhat more divided regarding the Middle East issue (I like how they use to call it that, as if it were the only issue) than the rest of the world. Thus, President Obama's positioning with regard to the topic is as important for foreign policy as it is for domestic. At the same time, it limits his ability to take a strong position in either direction. The world generally wants to see the US support the Palestinians to a greater extent, which President Obama has done to some degree. Here at home, there is a polarized view of the Middle East, with little differentiation made between peoples and topics (unfortunately). Therefore, the President must not waver from his support of Israel, which is viewed in America as one of few sanely led nations and populated places over there. Hey, don't shoot the messenger; I'm just telling it like it is. The best thing Middle Eastern peoples could do is to learn from and understand the ideology and actions of Dr. Martin Luther King Jr., or Jesus Christ for that matter - in order to win the support of Americans (and Israel). Oh yeah, now I'm really stirring you up!!!

Bernanke Meets Barbarians (read: House Budget Committee)

Federal Reserve Chairman Bernanke will testify before the House Budget Committee Wednesday morning at 10:00 AM. The topics of discussion will include the usual suspects: the economy, financial conditions and the federal budget. Later in the afternoon, the Fed publishes its Beige Book of economic activity (2:00 PM). At 4:00 PM, look for Federal Reserve Chairman Ben Bernanke's address on employment trends at the Richmond Federal Reserve Bank forum.

Mortgage Activity

Wednesday's pre-market data highlights the regular mortgage activity report. Old trends continued in this post-homebuyer tax incentive period. For the week ended June 4, the Market Composite Index of mortgage volume collapsed 12.4%. Without the tax incentive helping to sustain sales activity, and having pulled some forward, Purchase Activity fell off a cliff 16.3% (though only down 5.7% when seasonally adjusted). Refinance activity declined as well this week, and that is the most telling point in this data.

The Mortgage Bankers Association adjusted the data to account for the Memorial Day holiday, but it appears the adjustment was simply inadequate. Otherwise, we would not have expected the big move lower in the Refinance Index (down 14.3%), since rates were hardly changed from the prior week. Average contracted rates for fixed rate mortgages of 30-year and 15-years in duration stuck low at 4.81% (prior 4.83%) and 4.26% (4.24%), respectively.

The take home point from this data is, just relax for a week. Memorial Day clearly played a more important role than the adjustment could account for. That said, there's little doubt that the loss of the tax incentive leaves the residential real estate market a bit naked now.

Wholesale Trade

The Wholesale Trade Report for April is due up at 10:00 AM. Barron's reports the consensus forecast for wholesale inventory growth of 0.5%, versus March's 0.4% increase. Increases in energy inventories were offset by decreases in foods last time out. The inventory-to-sales ratio moved to a very low 1.13 in March, which is very low historically and compared against last March's 1.39.

Petroleum Inventory

The EIA's Petroleum Status Report is due at 10:30. Last week's data, covering the period ended May 28, showed crude oil inventory declined by 1.9 million barrels. Gasoline stores fell by 2.6 million barrels as summer driving season kicks in. Distillates stocks increased by 0.5 million barrels.

Corporate News Drivers

Investment company Needham is holding its health-care forum today. Tenneco (NYSE: TEN) is meeting with shareholders, while the trading lockup period ends for the shares of Concord Medical Services (NYSE: CCM) and Maidenform Brands (NYSE: MFB). That means you could see some selling pressure in the shares... The earnings schedule includes AMERCO (Nasdaq: UHAL), Analogic (Nasdaq: ALOG), Brown-Forman (NYSE: BF-B), Ciena (Nasdaq: CIEN), Luby's (NYSE: LUB), Hooker Furniture (Nasdaq: HOFT), Magal Security Systems (Nasdaq: MAGS), Men's Wearhouse (NYSE: MW), Navistar International (NYSE: NAV), Piedmont Natural Resources (NYSE: PNY), PURE Bioscience (Nasdaq: PURE), Repligen (Nasdaq: RGEN), Shuffle Master (Nasdaq: SHFL), Spartech (NYSE: SEH), Stewart Enterprises (Nasdaq: STEI), Titan Machinery (Nasdaq: TITN), Ulticom (Nasdaq: ULCM) and Vail Resources (NYSE: MTN).



Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.