Companies added fewer workers than forecast in April according to figures from the ADP research institute, and the ISM manufacturing index fell to 50.7 in April from the prior month’s 51.3. The markets await three key data points this week: Today’s FOMC announcement, tomorrow morning’s ECB announcement, and Friday’s employment situation announcement. It is a very busy week.
Equities: Key equity indices such as the SP 500 and Nasdaq E-mini futures are down slightly this morning, with the Nasdaq down only 2 points and the SP 500 JUN13 E-mini futures are down 5.5 points to 1586.75. They key pivot for today’s trading is 1590. Technically, the market could be preparing for a short term turn lower, but the highly important data to be released this week likely will trump the short term technicals.
Bonds: The U.S. 30-year bonds are rallying today on lower than expected ADP jobs report and an underwhelming ISM report. The bonds are certainly waiting to hear what the FOMC states this afternoon about future bond purchasing intentions. It seems as though the bonds are truly waiting for an official FOMC statement stating with certainty they will start to reduce bond purchases at some point in the future, and then the bond market might start to move down in price and up in yield. For the time being, the bonds have been very strong, even with the stock market making new highs this month.
Currencies: The yen has been in a quiet rally off of a potential double bottom right above 100. Today the yen is up 25 ticks to 102.83. We believe the yen could head to 104. The Aussie dollar is down 83 ticks today, likely going with key commodities such as oil and gold. We believe the yen has potential to rally further and the Aussie has potential to break below 102 to the downside.
Commodities: Today is a big day in commodities, with gold deflating some recent buying pressure, trading down $31 to $1,441. Crude oil, following a much larger than expected supply report, is trading down more than $3 to just above $90. We could see crude heading down to the low $80s. $82 is our first target.
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