Testimony from Fed Chairman Ben Bernanke and ADP's employment report are two of the big events for Wednesday.
Stocks stayed in the green Tuesday, even after Monday's sharp move higher. The S&P 500 finished at 944.74, up 1.87 points, while the Dow finished up 19 points at 8740. Stocks gained strength from better-than-expected pending home sales data and car sales.
"Yesterday, we crossed the 200-day moving average. I expected to see a pullback here," said Todd Leone of Cowen. "We had a great run Friday into month end, and we had a great run Monday. We've pretty much gone straight up."
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He said he expects the S&P 500 to retest the 920 level, before taking off again. Monthly auto sales were a bright spot, with industry sales now expected to come in at 10 million this year, better than economists had forecast. Industry sales fell by about 30 percent in May, the best results this year.
Commodities, which rallied Monday, were mixed Tuesday. Gold was about a half percent higher at $983.20 per troy ounce. The price of oil though slipped slightly, losing $0.03 per barrel to $68.55. Inventory data is expected at 10:30 a.m. Wednesday.
Treasurys were volatile early in Tuesday but stabilized in the afternoon. The 10-year was yielding 3.638 percent.
"You're still seeing some decent amount of volatility intraday, but it calmed down in the last couple of hours. We continue to get better than expected data and that pushes us to higher yields every other day or so," said Rick Klingman, managing director of Treasury trading at BNP Paribas.
Klingman said the Fed will be in the market Wednesday, purchasing 7- and 10-year issues. There will be three Treasury auctions next week for billions in 3-, 10- and 30-year notes. "People are worried we have a huge amount of supply. You combine that with good economic numbers and it's not a good mix," he said.
ADP's employment report, viewed as a preview for government jobs Friday, is reported at 8:15 a.m. ISM non manufacturing for May is reported at 10 a.m., as are factory orders.
In addition to Bernanke's testimony, former Fed Chairman Alan Greenspan speaks at noon at an American Enterprise Institute conference. Later in the afternoon, General Motors and Chrysler executives testify before Senate Commerce Committee on their plans to close dealerships. There is also a 2 p.m. hearing before a House financial services subcommittee on Fannie Mae and Freddie Mac.
President Obama is in Saudi Arabia Wednesday, ahead of his major speech in Cairo Thursday.
The dollar fell 1.1 percent against the euro Tuesday, reaching $1.4321 per euro at the end of the day. The euro has gained nearly 3 percent against the dollar in the last four sessions. The dollar was also 1.1 percent lower against the yen Tuesday.
"We've made new highs today with the euro with very little follow through. It doesn't feel like there's a fire burning under anyone to end the risk trade at this point. There's zero sign of any kind of pullback or reversal," said Brian Dolan, chief currency strategist at Forex.com. Dolan said the market's have been moving in sync, with the dollar falling as stocks and commodities move higher.
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"The general momentum is still positive for the risk trade, but it feels like it's slowing for the moment. In the currency arena, we had Geithner in China and he solicited the appropriate Chinese promise of support and he's done his part to try to support the dollar," he said.
Dolan said there's plenty of big investors selling into dollar rallies, and buying the euro on the dips. "I t think we're close to a top in the euro and bottom in the dollar," he said, pointing out that at the $1.45 per euro level or above, it will ready for a reversal.
He said Bernanke could be a catalyst for the dollar Wednesday. "I think he's going to see the usual signs of stabilization and say there's still a long way to go, and that financial conditions have improved. I think he'll be cautious about the banking outlook still. The markets have put that in the rear view mirror, but they have been absent in the recent stock market run up," Dolan said.
Financials, in the past two sessions, were down 0.7 percent. The sector has been contending with another wave of secondary offerings from J.P. Morgan , Morgan Stanely and American Express .
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