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U.S. stocks reversed course Tuesday, showing modest gains one day after Greek woes sent the Dow 350 points lower in the worst selloff of the year.
The Dow Jones Industrial Average added 23 points, or 0.13% to 17619. The S&P 500 tacked on 5.5 points, or 0.27% to 2063, while the Nasdaq climbed 28 points, or 0.57% to 4986.
For U.S. equity markets, Tuesday was the “calm after the storm,” according to David Lafferty, chief market strategist at Natixis Global Asset Management.
“We’re still in a little bit of a waiting game for the [Greek] referendum scheduled for Sunday,” he said. “The market has come down from yesterday’s heightened volatility. While the VIX is still elevated, it’s leveled off, so there’s not the spike in fear we saw yesterday.”
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On Wall Street, traders digested a slew of economic data from the U.S. including the latest read on the housing market with the April S&P/Case-Shiller home price index at 9 a.m. ET. Prices in 20 major metropolitan areas rose 1.1% for the month on a non-seasonally-adjusted basis, matching economists’ forecasts. From the same period a year prior, prices saw a 4.9% increase –lower than the 5.5% expected gain.
“Home prices continue to rise across the country, but the pace is not accelerating,” David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, said in the report. “Moreover, consumer expectations are consistent with the current pace of price increases. A recent national survey published by the New York Fed showed the average expected price increase among both owners and renters is 4.1%.”
Traders also got a snapshot of the Midwest manufacturing sector. The Institute for Supply Management-Chicago’s gauge of factory activity in the region rose to 49.4 in June from 46.2 the month prior. Consensus expectations called for a bigger increase to 50.3 for the month. Readings above 50 point to expansion, while all those below indicate contraction in the sector.
The latest reading on consumer sentiment from the Conference Board, meanwhile, jumped more than expected in June. The gauge rose to 101.4 from 94.6 in May, beating Wall Street expectations for a rise to 97.3.
The focus of the action on the Street wasn’t solely based in the West, however. Traders continued to eye the latest developments overseas in Athens.
For the most part, the markets appeared to shrug off concerns about Greece’s future in the euro – worries that were the primary downward catalyst for Wall Street in the prior session. Greece continued on Tuesday to hurtle toward its loan payment deadline to the International Monetary Fund. However, the nation’s finance minister, Yanis Varoufakis, told reporters Greece would not be able to meet that deadline.
Meanwhile, the Greek prime minister’s office said the government there was seeking a two-year agreement with the eurozone to cover the nation’s financing needs in a bailout package. It was unclear in the fluid situation where exactly Greece stands in ongoing negotiations with its international creditors to negotiate a bailout package before a looming default. Until now, Prime Minister Alexis Tsipras has been fully against accepting a deal that would have Greece cut pensions and raise taxes. On Sunday, the nation initiated capital controls on its banks to limit the strain on its financial system.
Eurozone and Greek officials are scheduled to reconvene Wednesday morning on a teleconference. Recent reports suggest that Greece could scrap a referendum vote this weekend if leaders can reach a deal.
Though a default for Greece on its obligations could seem like dire circumstances, for the most part, market participants in the U.S. said that outcome is essentially priced-in to the market.
“In the big scheme of things, in relation to the global economy and investment landscape, [Greece doesn’t matter]…Most people agree on this point including us,” Dan Greenhaus, chief strategist at BTIG wrote in a note to clients Monday night. “Many have told us like Cyprus, QE’s end or the debt ceiling, this will be a terrific buying opportunity.”
Moreover, Lafferty said the move up in U.S. equities Tuesday was also due to traders looking ahead to the end of the July-Fourth shortened holiday week.
“The jobs report means more for stocks this week than Greece does,” he said. “That wasn’t true yesterday, but given Sunday’s referendum, in the meantime, people will continue to debate what the Fed’s reaction to Greece will be and what the jobs report will look like. The U.S. market today is showing we’re in a holding pattern.”
He continued by saying the next markers to watch on the Greek saga will be when the nation reopens some of its banks on Wednesday to get a sense of the cash-flow drain, and the Sunday referendum, which will likely play out in some way in the U.S. equity markets on Monday.
Over in Europe, the Greece story painted a completely different picture in the equity markets. The Euro Stoxx 50 index, which tracks large-cap stocks in the eurozone, fell 1.29 % to 3424. Meanwhile, the German Dax dropped 1.25% to 10944; the French CAC 40 slumped 1.63% to 4790; and the UK’s FTSE 100 index saw a 1.5% decline to 6520.
In Asia, the Shanghai Composite, after tumbling into bear-market territory, rose 5.53% to 4277. Elsewhere, Hong Kong’s Hang Seng saw a 1.09% increase to 26250, while Japan’s Nikkei rose 0.63% to 1800.
In commodities, U.S. crude oil closed 2% higher at $59.47 per barrel. Brent crude saw a 2.5% climb to $63.60 per barrel. Gold, meanwhile, slid 0.62% to $1,171 per troy ounce.
Looking at currencies, the euro fell 0.86% against the U.S. dollar.