The S&P finished last week with two strong days of gains amid hopes that Congressional leaders had agreed in principal to temporarily raise the debt ceiling. However, officials were not able to finalize an agreement over the weekend and futures are lower this morning as a result. With the dysfunctional environment right now in Washington, we warned not to count the chickens before they hatched, and our leaders are once again throwing the market a high-stakes curveball. World markets are mixed but S&P futures are down about 10 handles.
If you are looking for short-term areas to use as support, watch Friday’s low and then 1680-1685. If that area does not hold we could see more downside probing.
This week is a busy one for corporate earnings. JP Morgan (JPM) and Wells Fargo (WFM) got the ball rolling on Friday with mediocre results. JPM opened higher despite a loss, attributed to legal write-downs, but traded lower during the session, while WFC opened well lower but rallied to back near the flat line. Banks will remain in focus early this week. Besides bank, we have General Electric (GE) and Google (GOOG) among the big names reporting.
Check the temperature of the sectors
The banks enjoyed a three-day rally as the Financial Sector ETF (XLF) tacked on another 0.59% to get back above all key moving averages on Friday. This week will be an important week for this sector as some big banks are reporting earnings: Citigroup (C) and Bank of America (BAC) on Tuesday, Goldman Sachs (GS) on Thursday and Morgan Stanley (MS) on Friday.
The Consumer Staples (XLP) led the market up on Thursday and got