|Dow||+29.69 to 18,040.37|
|S&P 500||+4.34 to 2,111.73|
|Nasdaq||+12.90 to 5,082.93|
|10-YR Yield||+0.097 to 2.192%|
|Gold||-$0.20 to $1,189.60|
|Crude Oil||+$0.01 to $60.31|
It’s “Game On” this week for the global markets! Three major events are looming, each of which has the potential to cause stocks, bonds, commodities and currencies to sink or soar.
First, Greece owes the first of several major payments to the International Monetary Fund (IMF) this Friday. It will be very tough for Greece to make the 300 million euro payment due June 5 without debt relief, much less the 1.2 billion euros in payments that follow shortly thereafter.
Greek Prime Minister Alexis Tsipras blasted his counterparts in the European Union and IMF for being intransigent and unyielding in their debt relief negotiations. Both sides failed to reach a new agreement on debt relief over the weekend, and if they can’t come together before Friday, all heck could break out in markets!
Second, ministers from the 12 nations in the Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna this Friday. The gathering comes amid increasing tensions in the group.
|OPEC ministers will meet this week in Vienna.|
Some members are pushing for immediate production cuts. But others are willing to keep the group’s 30 million barrel per day production quota in place, despite the fact crude oil prices are much lower now than this time last year.
The general consensus is that OPEC will sit tight overall. Officials believe that rising demand and falling U.S. production will help bring supply and demand back into line. Crude oil prices soared around 5% on Friday alone, helping the bull case. With prices knocking on overhead resistance just over $60 a barrel, any additional bit of bullish news from OPEC could set off the next leg up!
Third, the Labor Department will release the all-important monthly jobs report for May this Friday. Economists are forecasting that the U.S. created 225,000 jobs last month, roughly unchanged from 223,000 in April. The unemployment rate is expected to hold steady at 5.4%, a multi-year low.
A strong reading could prompt the Federal Reserve to act even sooner to normalize monetary policy. The problem? The huge dollar surge of late-2014, and the corresponding drop in oil prices, helped crater the U.S. economy earlier this year as I explained Friday.
|“A strong reading could prompt the Federal Reserve to act even sooner to normalize monetary policy.”|
So there are a lot of ways things could play out here. If we get a Greek deal, an OPEC output cut, and a weak jobs number, we’d probably see the dollar tank, oil surge and materials stocks rally sharply. If Greece defaults, OPEC keeps pumping and jobs surge, stocks and oil could tank amid fears of a hawkish Fed and the lack of relief on energy supplies.
I’ve given you my general outline of how I expect the big picture to play out in recent weeks. I see the dollar rally running out of steam, energy continuing to catch a bid, and select, highly rated stocks in key sectors to perform well. But this is definitely one of those “Game On!” weeks that could lead to significant market moves. So be sure you pay attention to Money and Markets for all the latest news and guidance.
Now, let me ask you what you expect to see? Do you think this will be an important week for the markets, and if so, why? What do you think OPEC will do, or the jobs data will show? How should the Fed react – and what shifts in your own investments are you planning? Let me know over at the Money and Markets website.
|Our Readers Speak|
Should we be more worried about the economy, in the wake of the lousy first-quarter data we got late last week? That’s what you chimed in on over the weekend.
Reader H.C.B. said the secret to understanding the economy is understanding credit growth. His take: “In a ‘managed’ economy like we now have, credit contraction and credit expansion are the primary influences on the domestic, consumer-based economy. You can infer the driver of our first quarter slowdown in aggregate demand. The rest is all talk and noise (radio static).”
Reader Cal C. added the following observations: “I would think the lower price of fuel would more than offset the higher dollar for domestic reasons. Even with the higher dollar, we still pay less for fuel for fleets and airlines, etc. Lumber is soft and interest rates are down. That’s a plus.”
Reader Tom also saw a few reasons for optimism, saying: “It’s true that the economy is weak thanks to Obama’s policies. But one stat that got overlooked is that corporate profits are up. Remember, profits are the mother’s milk of stocks.
“My advice? Buy the dips (via a diversified index fund). Then kick back, enjoy your summer, and count your profits later.”
But Reader Henry A. offered a much more pessimistic take: “Will the economy improve? No! Bad debt started the recession and it is a fact that we have even more debt now. Until this debt is deleveraged, we will stay is this slow depression because the fundamentals are unchanged.”
Thanks for sharing your thoughts over the last couple of days. I think we’re rapidly approaching some key dates, where either the rubber will meet the road in this economic expansion … or we’ll veer off into a pretty big ditch! I’ll be watching closely to see which way things look like they’re headed, and I’ll be sure to keep you updated along the way.
If you want to add anything else, here’s the link again where you can do so.
|Other Developments of the Day|
All the rumors were apparently true. Intel (INTC) is officially buying chipmaker Altera (ALTR) for $16.7 billion. The large tech sector deal will increase Intel’s reach in the non-PC sector of the semiconductor business.
Legislative bickering over the government’s surveillance powers led to the expiration of certain provisions in the Patriot Act today. Presidential candidate and Kentucky Republican Senator Rand Paul led the anti-surveillance movement, which resulted in the temporary expiration of those provisions. But a new compromise bill to restore or amend certain intelligence-collecting powers should pass by mid-week, and garner President Obama’s signature.
Consumer spending flat-lined in April, despite a 0.4% rise in personal incomes. That missed forecasts for a rise of 0.2%, and an inflation reading embedded in the monthly report rose at the slowest pace in five-and-a-half years.
File this under “Oops!” A California woman who was cleaning out her garage in the wake of her husband’s death came across some old computing equipment. She dumped it off at a local recycling firm, not realizing the equipment was actually a vintage Apple I computer.
Its estimated value? $200,000 or more, considering it would be one of only around 200 such models left in the world. The good news is that the firm will share half the bounty with the woman, if she sees the news and returns to the offices of Clean Bay Area.
So do you have any old computer equipment worth thousands of dollars, and have you gotten big bucks from it in the past? What do you think of Rand Paul’s intelligence collection efforts? Will consumer spending pick up soon? Let me know your thoughts on those stories or any others over at the website.
Until next time,