US major indexes all achieved respectable gains on Monday, as the S&P 500 extended its winning streak to three sessions. However, the rally can not be called yet as a 'follow-through day', a sign in which investors are advised to step in. We still prefer to treat the up movement of US major indexes as a 'relief rally' for the time being. A few factors are weighed on the downside ahead as risks have yet to be convincingly contained.
1. US indexes are up in lower trade with volume decreased across the board, not only from Fridays' elevated levels due to quadruple-witching expirations, but also from previous Friday. No convincing sign of institutional buying yet; 2. Market 'relief rally' was helped by an empty economic calendar until this Tuesday which may have cut into the number of cues available to traders prior to the FOMC's mid-week policy statement; 3. Eurozone finance ministers have delayed €12 billion in loans to Greece without which the country will default on its sovereign debt in mid-July. The move is expected to pressure the Greek government to pass €28 billion in spending cuts and tax increases. Meanwhile Greek prime minister George Papandreou is set to face a confidence vote in Parliament tomorrow; 4. Moody's threatened to downgrade Italy's Aa2 credit rating in next 3 months, on concerns that the Greek crisis may push up interest rates in the eurozone and hurt Italy's recovery; 5. Wages and salaries in the Eurozone were up 2.3% in Q1 2011 from a year ago, but the wage increase was lower than the 2.7% increase in consumer prices, which showed that real wages in the region continued to stay low.; 6. Goldman Sachs cut its Q2 GDP growth outlook to 2%, from 3%, on weak manufacturing data and high unemployment. The news was a blow to the U.S. economy which was expected to be on its way to a recovery. '+'
