Those who sold in May and went away may want to come back a little sooner than St. Leger’s Day.  After two losing months, stocks roared back in June, posting incredible numbers and closing out the second quarter with sharp gains on strong volume.

The Big Picture Friday’s gains of 2.2% for the Dow Jones Industrial Average, 2.49% gain for the S&P 500 index and a 3% advance for the NASDAQ helped make June the best month of 2012 for the Dow.  It was the best June since 1997 for the Dow, since 1999 for the S&P and the best June since 2000 for the NASDAQ. 

A positive confluence of events last week powered global equity markets sharply higher.  After months of negotiations, the European Union appears to have finally reached an agreement on monetary aid to member countries’ struggling banks as German Chancellor Angela Merkel softened her stance.  It doesn’t mean the Euro is out of the woods but it has certainly been pulled back from the brink. 

The clouds of uncertainty surrounding immigration and healthcare vanished with this week’s Supreme Court’s rulings.  While there is still great disagreement over the decisions, CEOs and money managers can no longer hide behind the veil of uncertainty.  However, the new reality will continue to be plagued by politics. 

Politics were briefly set aside as Congress agreed to hold the interest rate on student loans steady at 3.4% for the next year, at which time we’ll go through this same dance once again. 

The economic fog appears to be lifting, revealing some good news in the housing sector.  According the National Association of Realtors, pending home sales are at a two-year high, helping to reduce the inventory of single-family homes, condos and town-homes for sale, which may ultimately lead to a rise in prices. 

The price of crude oil tumbled nearly 20% in the second quarter, translating to lower prices at the pump and more money in consumer’s pockets, just in time for the Independence Day holiday and beyond. 

This bevy of activity forced investors who sold short to cover their positions and money managers to aggressively window-dress their portfolios to improve its appearance, all in advance of the weekend.  

I, Investor 

While down for the second quarter, major market averages remain in the black for the year.  The Dow, down 2.5% for the quarter, is up 5.4% year-to-date.  The S&P is off 3.3% for the quarter but better by 8.3% for the year. The NASDAQ shed 5.1% in the second quarter but posts a nearly 13% gain for the year. 

The second half of the trading year starts with a week bifurcated by the 4th of July holiday, so expect volume to be rather light.  But the positive tone from last week should carry over, until Europe’s financial woes reclaim the spotlight and the domestic data disappoints. 

Monday, July 2 sees the release of the Institute of Supply Management’s June manufacturing index as well as constructing spending for May. 

Stock and bond markets will close early Tuesday, July 3, after digesting May factory orders and June vehicle sales.  Thursday, July 5 starts with weekly jobless claims, building up to Friday, July 6th release of the June unemployment report.

The second quarter earnings parade kicks off Monday, July 9th when Dow component Alcoa reports earnings per share.  Later in the week, Charles Schwab, JP Morgan Chase and Wells Fargo lead the financial sector’s earnings report, while search engine Google represents the technology sector. 

Finally, trade numbers, consumer credit and sentiment figures, export-import prices, treasury budget data and wholesale inflation readings round out the economic calendar and set the stage for the next move. 

Baring any negative surprises in the employment report, stocks may try to build on June’s gains.  Historically, July is good for the Dow and NASDAQ, according to the Stock Trader’s Almanac and, technically, equities are in good shape but watch out for increased volatility and light summer volume.


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