Thursday’s close ended a short week of volatility as investors considered the long weekend with increasing uncertainty. Greece’s referendum on Sunday and a move by China to suspend IPOs in order to stabilize the worst sell-off in the country’s stocks in years contributed to their angst.
Greeks voted “no” on Sunday, rejecting new austerity as well as new financial aid. The result increases uncertainty regarding Greece’s future and the future of the eurozone. Volatility in global and U.S. markets is expected to increase.
Stocks closed slightly lower Thursday with six of the S&P’s 10 sectors negative. Energy, technology, telecom services and utilities registered gains. Utilities led with a rebound of 1.3%, and energy was in second place, up 0.4%.
Nonfarm payrolls for June came in at 223,000, below the consensus estimate of 230,000, and government payrolls were flat. The unemployment rate fell to 5.3% in June from 5.5% in May versus a forecast of 5.4%. Initial jobless claims increased by 10,000 to 281,000. Factory orders fell 1% in May versus expectations of a 0.5% decline.
Weakness in the transportation sector contributed to a 2.2% decline in May’s durable goods orders, which was a downward revision from a previously reported decline of 1.8%.
At Thursday’s closing bell, the Dow Jones Industrial Average fell 28 points to 17,730, the S&P 500 fell 1 point to 2,077, the Nasdaq lost 4 points at 5,009, and the Russell 2000 was down 8 points at 1,248.
The NYSE’s primary market traded 725 million shares with total volume of 3 billion. The Nasdaq crossed 1.5 billion shares. On the Big Board, advancers and decliners were almost even, and on the Nasdaq, decliners led by 1.7-to-1.
The S&P 500 has thus far held above the lower line of a bull channel at about 2,060 and its 200-day moving average at 2,055. However, it failed to close higher than the secondary resistance line at Thursday’s high at 2,085. A close under the 200-day moving average will most likely trigger a further sell-off to at least a 2,033, a 61.8% Fibonacci retracement of the December closing low of 1,973 and the May closing high of 2,131.
Monday’s break of the Nasdaq’s intermediate bull channel support line at under 5,000 portends a further decline. And the index’s traditionally higher volatility combined with an estimated P/E of over 22.5 times 2015 earnings estimates makes the index more subject to profit-taking.
A failure to regain ground this week will likely lead to a test of the 200-day moving average at 4,802 and could even result in a full 61.8% retracement of the December closing low at 4,548 to the June closing high of 5,160, which is 4,782.
As a result of Greece’s “no” vote, expect very high volatility this week. However, since it is unlikely to result in a long-term impact on U.S. markets, be prepared to purchase some of our deep discount favorites of the past two weeks.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.