EmailThere was some anxious trading activity on Monday as the market flirted with its previous all-time high before getting rebuffed by a comment from Eurogroup head Jeroen Dijsselbloem, who reportedly said the Cyprus bailout plan could be a template for other EU banks.
The market had already started to backtrack when it was unable to push through resistance at 1565, yet selling efforts accelerated in Europe and the US as Dijsselbloem's remarks crossed the wires. Soon thereafter, there were also rumors circulating that Italy could soon see its sovereign debt downgraded.
The major averages languished in the face of the worrisome headlines as buyers moved to the sidelines. Treasuries in turn benefited from renewed buying interest that had a safety orientation.
Later in the day, however, the Eurogroup put out a statement indicating Dijsselbloem did not actually say what was reported and that every bailout case is unique and requires its own set of circumstances. In other words, the Eurogroup was refuting the idea that the Cyprus bailout plan can be thought of as a template for other EU banks.
Following the refutal, there was a rush of buying interest that helped repair some of the damage done by the initial report. The market, however, didn't recover fully and ended the session down 0.3%.
Cyprus remains a focal point today, with recent reports suggesting the levy on bank deposits in excess of EUR 100,000 could be 40%; moreover, Cypriot banks will remain closed until Thursday. European bourses, which were up earlier, have faded. Germany (+0.1%) is clinging to a small gain, yet Spain (-1.4%), Italy (-1.1%) and Greece (-4.3%) are finding the Cyprus sledding a lot more difficult today.
The US market, on the other hand, is indicated to open modestly higher. The S&P futures are currently trading 0.3% above fair value, suggesting the cash market should recoup a good bit of the ground it lost yesterday when trading begins.
There isn't a specific catalyst for the positive bias, which is probably more reflexive than anything else as participants have grown accustomed to buying on dips.
The February Durable Goods Orders report didn't upset the nature of things this morning. As expected, the headline number was robust while the orders number, excluding transportation, was not.
Specifically, durable orders jumped 5.7% (Briefing.com consensus +3.8%) in February, led by a 21.7% increase in transportation equipment orders that totalled $74.4 bln (or roughly three times the annual output of Cyprus). The improvement was paced by a 95.3% gain in nondefense aircraft and parts that flowed from a large pickup in orders at Boeing.
Excluding transportation, orders declined 0.5% (Briefing.com consensus -0.2%). There were some mixed readings outside the transportation sector. Orders of primary metals, for example, rose by 1.7% while orders for fabricated metal products declined by 4.4%. Machinery orders were down 2.2% after a 15.8% increase in January while orders for computers and related products were up 1.3% after a 4.6% decline in January.
In the same vein, orders for nondefense capital goods, excluding aircraft -- a proxy for business investment -- dipped 2.7% after increasing 6.7% in January. Shipments of these goods, which factors into GDP computations, rose 1.7% after slipping 0.7% in January.
The February Durable Goods Orders report offers a good picture of the volatility that is typical for this release. Many areas that saw declines in January rebounded in February and vice versa. Accordingly, the market's response to the report has been fairly muted.
Other data today includes the S&P Case-Shiller Home Price Index (Briefing.com consensus +7.5%; prior +6.8%), the March Consumer Confidence report (Briefing.com consensus 66.9; prior 69.0), and the February New Home Sales report (Briefing.com consensus 426,000; prior 437,000).
