EmailWhat was lost yesterday on the first day of the second quarter could soon be found again if the positive bias in the futures market is maintained. Currently, the S&P futures are trading 0.4% above fair value.
The eurozone reportedly has a lot to do with the bullish bias and the reasons are obvious. Check this out:
- The eurozone unemployment rate was reported at an all-time high of 12.0%
- The Markit PMI manufacturing index for the eurozone contracted further to 46.8 in March from 47.9 in February, but was ahead of lower expectations (phew)
- A CNBC.com report indicates Spain is going to revise its 2013 GDP forecast to -1.0% from -0.5%;
- Cyprus will reportedly be given more time to meet its budget targets and headlines are crossing that its finance minister is resigning; and
- Italy continues to lack a ruling party/coalition
With that litany of "good" news that enhances the prospect of the ECB easing policy rates and is the equivalent of making lemonade out of lemons, major European bourses are up across the board with Germany (+1.1%) setting the pace.
The resilience of the European markets has set a good tone in front of the US open, which should see the health care sector in an early leadership position.
After yesterday's close, the Centers for Medicare and Medicaid Services announced that it will increase the rate it pays health insurers offering the Medicare Advantage program by 3.3% in 2014 instead of cutting payments by 2.3% as previously announced in February. Dow component UnitedHealth Group (UNH) is trading 4.0% higher in premarket action.
The strength in higher-priced UNH is helping to offset the weakness in Hewlett-Packard (HPQ), which is down 3.7% in premarket trading, following a Goldman Sachs downgrade to Sell from Neutral.
Today's economic calendar features the February Factory Orders report at 10:00 a.m. ET (Briefing.com consensus +2.6%; prior -2.0%). Auto and truck sales for March will be released throughout the day.
Separately, four Fed presidents will be speaking today - Kocherlakota (Minneapolis), Lockhart (Atlanta), Evans (Chicago) and Lacker (Richmond) - but only Evans has a vote on this year's FOMC. The speeches from Messieurs Evans and Lacker will take place after the market closes. Mr. Kocherlakota, who made his dovish views known last week, will speak at 1:00 p.m. ET while Mr. Lockhart is scheduled to speak at 1:30 p.m. ET on the economic outlook and monetary policy.
With the Easter holiday over, volume should start to pick up again. To be sure, the hurdle rate for improvement there is pretty darn low considering the 575 mln shares traded yesterday at the NYSE was the second lowest total this year.
With the surprisingly soft start on the first day of a new quarter, there will be added interest today in seeing whether the early gains can be maintained or whether they fall by the profit-taking wayside by the time the closing bell rings.
