Upcoming Labor Reports & Earnings Reports Will Guide Market

Stocks opened modestly higher, but have erased the early gains and are lower into midday Tuesday. After shedding 7 points Monday, the S&P 500 is down 5 points to 2156.20 and nearly 10 points from session highs.

With no economic data to guide trading, Treasury bonds are little changed in wait-and-see action ahead of jobs data later this week. The yield on the benchmark ten-year is ticking up to 1.65%.

Crude oil added 20c to $49 and gold lost $27 to two-month lows of $1285.50.

Eight of ten market sectors are lower on Wall Street, paced by Utilities (XLU), Consumer Staples (XLP), and Telecomm (IYZ). Financials (XLF) are seeing relative strength.

CBOE Volatility Index (VIX) is up .03 to 13.60 and options volumes are relatively light for a second day. 2.8 million calls and 2.4 million puts traded across the exchanges. Projected volume for the day is 14.6 million and 10% below the one-month daily average.

SPDR High Yield Bond Fund (JNK) Jan 37 calls, SPDR 500 Trust (SPY) 211 puts and SPY Nov 201 puts are the most actives of the day.

Looking forward, jobs data will be in focus over the next few days. ADP offers a first peek at the situation in September with a private sector report Wednesday morning. Weekly jobless claims are due Thursday. Then the Labor Department releases monthly data Friday, with economists expecting a headline of 176K jobs created last month and the rate of unemployed remaining unchanged at 4.9%.

The US dollar is seeing notable strength ahead of the data. Take a look at the chart below. It shows the recent action of the PowerShares Bullish Dollar Fund. Trading under the ticker UUP, this fund tracks the performance of the dollar against a basket of other major currencies. It is heavily-weighted towards the EUR/USD pair.

Tradespoon’s Stock Forecast on POWERSHS DB US DOLLAR INDEX-DOLL INDX BULL (UUP)

Stock Forecast on POWERSHS DB US DOLLAR INDEX-DOLL INDX BULL (UUP)

Today’s spike in the bullish dollar fund has shares trading near a 200-day moving average. Note that the ETF has been consolidating into tight range along the 50-day moving average in recent weeks and today’s gap move has it at one-month highs.

The breakout move is in large part due to weakness in Eurozone currencies Tuesday and sets up an interesting backdrop heading into Friday’s jobs report (because of the potential impact from gyrating currencies on other assets). Today, for instance, gold and shares of gold mining companies are reeling as the greenback rallies.

Dollar strength also comes ahead of the third quarter earnings reporting period, which kicks off next week with a number of large banks due to report. Analysts currently expect overall results to be down 3.1% from a year ago on 1% higher revenues. Then, positive growth is expected to return in the fourth quarter or early-2017, but that, in turn, will likely depend on many factors, including the swings in the US dollar.

For now, the Bullish Dollar Fund seems to be facing some resistance along the 200-day moving average and $25 per share. Support likely at $24.90 and $24.50 per share. As for the S&P 500 Index, this week’s high of 2165 is a resistance area, as is 2175 and 2186. Look for support at 2151, 2146, and 2125.