Asian markets were also mostly lower overnight, including China, despite a move by the central bank in China to cut its reserve requirement for banks. So China is easing monetary policy to help stem the slowdown they are seeing over there. Time will tell how much additional stimulus might be needed.
The political rhetoric continues to heat up in Greece, with chatter about them leaving the euro. This is causing the euro to drop further, while the dollar is adding to its back-to-back weekly gains. The strong dollar is also weighing on commodities. Oil prices are lower near $94.30 while gold prices are back down to $1560. I haven't heard much about lower prices at the pump for consumers, but it should be coming. A look at the chart of UGA (gas etf) shows it peaked a month ago and remains in a downtrend.
There is not much in the way of corporate news or economic data in the U.S. to distract investors from Europe. Financials are down the most so far today, while defensive utilities are down the least.
The 10-year yield has fallen to new multi-month lows. The yield at 1.77% is at its lowest levels since last October. Of course, that was prior to a big multi-month rally in the markets. But I think its too early to look for a similar setup. As for the VIX, it has topped last week's highs and is up 8% near 21.65.
Trading comment: Last Friday I wrote that I felt the market was making a short-term bottom. Trading is never precise, and I still feel that is the correct call. Today the SPX has undercut last week's lows and also breached the March lows at 1340. But so far the market seems to be hanging in there, and we will just have to see how the market fares into the close. If we can reverse some of this weakness and close in the upper range of the day I would feel better about more upside in the near-term. What I don't want to see is the market to close at its lows.
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