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The Dow Futures Report

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US Equities tred a cautious session, profilt taking ahead

Wed, May 6 2009, 05:46 GMT
by Paul Brittain

Alaron

US EQUITIES TRED A CAUTIOUS PATH AHEAD OF EMPLOYMENT DATA. MARKETMAINTAINS BULLISH TONE AS IT CLOSES AT TOP OF RANGE IN SPITE OFHEADWINDS. DATA OFFERS SOME SUPPORT.

US EQUITIES staged what be considered a successful defense of Monday’s gains after comments from Fed Chairman Bernanke, a better than expected reading on the service sector, and continued positive sentiment regarding the financial sector’s ability to raise capital limited the markets pullback to a profit taking function rather than a resumption of the “sell the rumor, buy the fact” strategy which has occurred during employment data weeks for the last year. The market appears to be discounting the initial effect of the employment indicators, as expectations are for the US unemployment rate to challenge the level of 10% before finding any ability to recover, as employment is considered to be one of the last indicators to show signs of the developing economic trend.

Despite the relatively subdued pullback, most of the major sectors offered pullbacks from Monday’s gains. Financials posted a mixed picture as banks that already have capital increases priced into their shares (BOA, Citigroup) rose while the uncertainty of their position weighed on shares of Wells Fargo and JP Morgan Chase.

Energy and material stocks pulled back from yesterday’s gains after crude oil fell from a 5 month high and steel companies took a hit from expectations of continued earnings challenges in the wake of the slowdown in the auto industry-one of its largest customers. Overall though, most analysts determined that the overall mild pullback and strong close represented sustained positive sentiment for equities.

Technically, June Dow futures continue to remove higher, with resistance setting up at 8449. Upward target for the market should be 8579. Support for a retracement move should be at 8230, with a key breakdown level at 8080.

Published on  Wed, May 6 2009, 09:52 GMT