Stocks moved lower Wednesday to snap a four-day winning streak as violent clashes between police and anti-austerity protestors broke out in Syntagma Square as the Greek parliament began debate on the over-the-weekend bailout agreement that is (let’s be honest)tantamount to a total surrender to its hardliner creditors.
Investors also reacted to late news from Tuesday that the International Monetary Fund is threatening to pull out of any new agreement unless hardliner creditors in Germany and Finland (where, as an aside, the government is steadfastly against giving Greece more money) soften their stance on debt haircuts.
In the end, the Dow Jones Industrial Average lost a fraction, the S&P 500 lost 0.1%, the Nasdaq Composite lost 0.1%, and the Russell 2000 lost 0.7%.
Crude oil lost 3% today to close at $51.43 a barrel as traders realize Iranian crude is about to rush onto the market. That pushed up the ProShares UltraShort Bloomberg Crude Oil (NYSEARCA:SCO) position recommended to Edge subscribers in late May by 5.6% — taking its month-to-date gain to 29%. Energy stocks, as a group, lost 1.6% as a result.
Materials stocks were also weak despite better-than-expected economic data out of China overnight. The good data also failed to lift Chinese stocks, which have been the center of intense policy support measures from Beijing. The Shanghai Composite lost 3% and remains down some 27% from its June high.
The ProShares Short MSCI Emerging Markets (NYSEARCA:EUM) recommended to Edge subscribers is up nearly 7% sine recommended on May 28 thanks in large part to the meltdown in China.
Federal Reserve chairwoman Janet Yellen’s semi-annual monetary policy testimony to Congress was largely as expected, reiterating that rate hikes are more than likely this year. The latest is that Yellen seems to be leaning toward a quick liftoff timing in exchange for a more gradual pace of tightening instead of waiting too long and wage inflation taking off, which would force the Fed to tighten more quickly.
There was some mixed economic data as well, with producer price inflation surprising to the upside on a monthly basis. Still, on a year-over-year basis, headline PPI remains subdued at 0.7%. Much depends on where energy prices go from here in the wake of Tuesday’s Iran nuclear deal announcement. Industrial production came in slightly better than expected for June, posting a 0.3% monthly jump vs. the 0.2% expected.
On the earnings front, Bank of America Corp (NYSE:BAC) reported a Q2 earnings per share beat thanks to expense control and in-line revenue growth. After the close, technology names Intel Corporation (NASDAQ:INTC) and Netflix, Inc. (NASDAQ:NFLX) both reported earnings beats and are up strongly in after-hours trading. Intel is up 3.6% as I write this while NFLX is up nearly 10%.
Looking ahead, much still needs to be done before we see a deal in Greece, including placating the IMF’s debt relief demands, finding a short-term funding solution, and getting Greek banks reopened. The specter of political disunity or ongoing violence cannot be dismissed. Also, Chinese markets remain vulnerable.
And the flow of earnings will increase on Thursday with Citigroup Inc (NYSE:C), Goldman Sachs Group Inc (NYSE:GS), and Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL) all reporting.
I continue to recommend investors remain cautious as stocks continue an eight-month-long sideways churn.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
