Market Googled
S&P – Stock index futures got a lift after Google beat the Street and defied earlier reports that its paid click business was cooling. The company posted profits of $4.84 a share (excluding special items) versus analyst estimates of $4.55 a share – news that sent the company's stock as much as $80 higher in extended hours trading. Citigroup reported a loss of $5 billion for the quarter due to write-downs of $12 billion and a 48 percent decrease in revenues. While the loss of $1.02 a share missed Street estimates of a $0.95 loss, the company will continue to “divest non-strategic assets," according to CEO Vikram Pandit, meaning the company will try to package and sell its more risky investment products. Investors took news of Citi going back to its core business as a positive and shares were higher in European trading. Dampening the relatively upbeat Citigroup announcement, analysts have suggested that Merrill Lynch may need a capital infusion to stay afloat, citing the fact that the company has already used up most of the capital it raised in 2007. With no major economic releases, corporate earnings and option expiration may lead to volatile, choppy trading for much of today's session. June e-mini S&P futures have flirted with near-term highs at 1389 in early trading, but closes above 1402.50 may be needed to spark extended rallies. Momentum is starting to turn lower despite today's rally, suggesting it may be running out of steam. Support comes in at 1362.25, 1352.50 and 1346.25, while resistance can be found at 1378.50, 1384.50 and 1394.25.
Eurodollars – Eurodollar futures are lower for the fifth consecutive session on technical weakness and changes in interest rate outlooks. Interest rate traders have shifted their outlook on Fed policy this week, with the rate cut bias going from half a point down to only a quarter point. With energy and food prices rising at their fastest pace in 17 years, the central bank may be forced to address the inflation issue, meaning less aggressive interest rate policy. The sharp rise in commodity prices can be directly attributed to two factors: tight supplies and a weak U.S. currency. While the Fed can do little to address the first issue, moderation of its recent aggressive rate-cutting policy can lead to stability in the greenback and aid in slowing down the commodity freight train. June Eurodollars broke support at 97.26, which has aided in accelerating the downside move. The next significant chart support areas are found at 96.835 and 96.40, suggesting further declines may be possible. Momentum has begun to move lower at a slower rate that the RSI, suggesting the market may find some stability in the near term. Support comes in at 97.0250, 96.9275 and 96.7925, while resistance can be found at 97.2525, 97.3875 and 97.4825.
Crude Oil – Oil futures are lower this morning on profit-taking and stabilization in the U.S. Dollar. Here too, the possibility that the Fed may begin backing off of its aggressive rate cutting strategy in order to shore up the slumping greenback can be viewed a negative for energy prices. On the other hand, fundamentals have improved recently and the driving season is beginning to approach, making a price collapse in energy prices unlikely in the near term. Technically overbought conditions and lack of fresh news has led to profit-taking over the past two sessions. Momentum remains flat – despite the market being lower this morning – suggesting near-term strength. Support comes in at 114.15, 113.45 and 112.75, while resistance can be found at 115.55, 116.25 and 116.95.
Rob Kurzatkowski, Commodity Analyst
