The equity market continued to languish on Wednesday, as the S&P 500 dipped 0.4% for its sixth consecutive loss.  To say the least, that is one six-pack that isn't bringing cool relief.

The S&P 500 has declined 4.9% since the end of May in a relatively orderly, yet worried-filed, trade that has been punctuated with concerns about a slowdown in the global economy being more than a temporary occurrence.

Those concerns were evident again yesterday as small-caps, semiconductors, basic materials, financial, and transportation issues all underperformed the market.

Today the market will be looking to get on the board in June with its first winning session.  It is poised to start slightly higher, but that matters little as recent sessions have shown that there is a prevailing tendency to sell into strength. 

The latter will remain the tendency until, well, it isn't.  It is an expected outcome right now because it has happened regularly.  Accordingly, if sellers don't show up late one day, there is a potential for a strong, short-covering flurry into the finish that day as the absence of sellers is apt to be construed as a bottoming signal.

Overall, though, the equity market continues to face an uphill battle in terms of headline risk, so follow through efforts on any short-covering rally should prove arduous without any genuinely good news.

There is a lot of news to digest this morning, beginning with a Q2 earnings warning from Texas Instruments (TXN) that was attributed to weakness at Nokia (NOK) but mitigated by reports of solid order trends otherwise; and decisions both by the European Central Bank and the Bank of England to leave their key lending rates unchanged at 1.25% and 0.50%, respectively.  Alternatively, Brazil's central bank raised its key rate by 25 bps to 12.25%.

Market participants are now keying on ECB President Trichet using the phrase "strong vigilance" at his press conference with respect to containing inflation as a hint that a rate hike in July is likely.

In other developments, this morning's economic releases were mixed.  The not-so-good news is that initial claims remained above 400,000 for the week ending June 4 while the good news is that the U.S. trade deficit narrowed to $43.7 bln in April from $46.8 bln in March, which was revised from an originally reported deficit of $48.2 bln..

Briefly, initial claims rose 1,000 from the prior week to 427,000 and were slightly weaker than the Briefing.com consensus estimate of 423,000.  A level above 400,000 is not typically consistent with strong labor growth.  Although the latest reading doesn't cover the survey period for the June household survey on employment, it will nonetheless feed ongoing concerns about the frustratingly slow pace of recovery in the labor market.

Continuing claims for the week ending May 28 declined 71,000 to 3.676 mln (Briefing.com consensus 3.688 mln).

The trade balance report was a welcome surprise in that it will factor favorably into Q2 GDP estimates; additionally, the upward revision to March should have a positive influence on the third estimate for Q1 GDP.

Exports in April were $2.2 bln more than March exports of $173.4 bln while April imports were $1.0 bln less than March imports of $220.2 bln.  Strikingly, the decrease in imports was led by a $2.8 bln decrease in imports of automotive vehicles, parts and engines and a $2.4 bln decline in crude oil.

Importantly, the real trade deficit narrowed from $49.7 bln in March to $44.2 bln in April.  The latter is 12% below the first quarter average.

The market's response to the data was mixed like the releases themselves.   The futures initially popped on the trade number, but have since settled back to levels seen prior to the releases.

--Patrick J. O'Hare, Briefing.com

Patrick J. O'Hare is the Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial please email researchsales@briefing.com.