Stocks posted modest gains on Thursday, trimming their rise into the close, after Wednesday’s ebullient Greece bailout negotiation headlines were eclipsed by word the International Monetary Fund has pulled its team from talks in Brussels.
The stakes in this long-simmering drama have just been raised as Greek leaders are pressured from both sides: establishment figures that want compromise and far-left supporters in the coalition government that sympathize with the anti-bailout protestors that spilled into Athens’ streets tonight.
The IMF’s spokesman added that an agreement remains a long way off as major differences remain on issues such as pensions, taxes and financing. Greek officials, for their part, have also said to have left Brussels to return to Athens.
Without a deal or an extension by the end of the month, Greece will likely default on a batch of IMF debt repayments worth about $1.8 billion.
In the end, the Dow Jones Industrial Average, the S&P 500 and the Russell 2000 all gained 0.2%, while the Nasdaq Composite gained 0.1%.
The other big catalyst on the way was a strong retail sales report, just the latest U.S. economic data point to strengthen — increasing the pressure on the Federal Reserve to raise interest rates sooner rather than later heading into its two-day policy meeting ending June 17.
Sales jumped 1.2% over April led by a strong rise in auto sales. The result confirms the economy has snapped out of the soft patch suffered earlier this year as consistent job gains, higher net worth, and the specter of increased wage inflation spurs on shoppers.
Crude oil lost 1.2% to close at $60.67 a barrel after Saudi officials said the kingdom was ready to boost production in coming months to record highs to match any demand. Saudi production was already increased to 10.3 million barrels per day in May — a time of the year that historically they have lowered exports as domestic demand peaks. As a result, energy stocks were the day’s laggards falling 0.4% as a group. The ProShares UltraShort Crude Oil (SCO) recommended to Edge subscribers gained 1.3% as a result.
Technically, while the Dow remains in stasis near the 18,000 level (which is also where its 50-day moving average is) market breadth continues to be weak — so much so that a “Hindenburg Omen” was triggered today thanks to divergences between price, new highs, new lows, and advancing and declining measures of market internals. Just look at the way the percentage of NYSE stocks above their 50-day moving average has been rolling over since late May.
Long story short: Stocks are much more vulnerable than they appear on the surface.
Friday’s big news will be the release of the latest on producer price inflation. Analysts are looking for a 0.4% rise for May after April’s energy-led 0.4% decline. A strong report will further erode the support of policy doves at the Fed for continuing to hold short-term interest rates near 0%.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters.
