Dow +227.11 at 18076.19, Nasdaq +45.39 at 4982.83, S&P +25.07 at 2099.27
The announcement of Fed dropping the word 'patience' give the market an instant rally. The Fed is pushing back their decision to raise the interest rate from June to probably September. Also we saw the Dollar Index went down as a result of the announcement. I guess this might be the catalyst to bring the market higher...Volume still remains weak in the market and this means that the big players are not getting their positions yet. That explains the lack of leadership too.
Anyway tomorrow will have the FOMC meeting decision and this is going to be a significant market mover. Watch out for the crude oil as well since the oil prices have dropped to a recent low recently. These would just bring in more volatility into the market and for now it is better to stay out.
Direction for Wednesday 18 Mar, 2015; Abstain
Market Summary
Industry Watch
Strong: Energy, Technology, Telecom Services, Materials, Utilities
Weak: Consumer Staples
Other Market Moving Factor:
- Crude oil dives below $43.00/bbl
- FOMC drops "patient," but lowers GDP and inflation outlook
[BRIEFING.COM] The stock market spent the first half of the Wednesday session in the red, but surged into the green following the latest policy statement from the Federal Open Market Committee. The S&P 500 settled higher by 1.2% with all ten sectors ending in the green.
Over the past few days, much of the discussion centered around today's FOMC Statement with participants speculating whether the central bank was going to remove its call for patience. Although the Fed took out "patient," the statement remained quite dovish as the Fed lowered its 2015 GDP forecast range to 2.3%-2.7% from 2.6%-3.0% that was expected in December. Furthermore, the central bank lowered its inflation forecast range to 0.6%-0.8% from 1.0%-1.6%.
Staying on the inflation theme, the committee noted that it needs to be "reasonably confident" that inflation will move back towards the 2.0% objective before hiking rates.
The S&P 500 spiked about 20 points immediately following the statement and continued its advance as the afternoon progressed. Similarly, Treasuries surged in reaction to the diminished likelihood of June rate hike with the 10-yr yield falling 10 basis points to 1.95%. The benchmark note continued its advance during electronic trading, pressuring its yield to the lowest level since early February (1.92%).
Conversely, the dovish tone weighed on the greenback, sending the Dollar Index (97.48, -2.11) lower by 2.2% to last week's levels. Notably, the euro jumped nearly 3.0% to 1.0900, and the pullback in the dollar gave a boost to commodities. Gold futures spiked 1.7% to $1168.20/ozt while crude oil rallied 3.0% to $44.77/bbl. In turn, the energy sector (+2.9%) finished the day in the lead while the utilities sector (+2.7%) led the countercyclical side.
The utilities sector solidified its spot atop this week's leaderboard (+4.3% week-to-date) while the top-weighted countercyclical group—health care (+1.3%)—settled in-line with the market. Interestingly, biotechnology struggled to keep pace with the iShares Nasdaq Biotechnology ETF (IBB 358.14, +1.89) climbing 0.6%. To be fair, the biotech ETF still managed to register its fifth consecutive gain while setting a fresh record high.
Switching back to the cyclical side, the top-weighted technology sector (+1.3%) finished just ahead of the broader market with Oracle (ORCL 44.13, +1.26) providing support. The sector heavyweight spiked 2.9% after reporting in-line earnings on below-consensus revenue; however, the company boosted its quarterly dividend by 25.0% to $0.15/share. In other sector earnings, Adobe (ADBE 76.89, -2.77) lost 3.5% after its cautious guidance for Q2 overshadowed a bottom-line beat.
Elsewhere, transport stocks underperformed after FedEx (FDX 173.30, -2.41) beat bottom-line estimates and guided below consensus estimates. Shares of FDX fell 1.4% while the broader Dow Jones Transportation Average added 0.4%. For its part, the industrial sector (+1.2%) settled in-line with the broader market.
Today's participation was ahead of average with more than 860 million shares changing hands at the NYSE floor.
Economic data was limited to the weekly MBA Mortgage Index, which fell 3.9% to follow last week's 1.3% decline.
Tomorrow, weekly Initial Claims (Briefing.com consensus 293K) and Q4 Current Account Balance (consensus -$105.00 billion) will be reported at 8:30 ET while February Leading Indicators (expected 0.2%) and March Philadelphia Fed Survey (consensus 6.9) will both be released at 10:00 ET.
Global Market
ASIA
Asian Markets Close: Japan’s Nikkei +0.6%; Hong Kong’s Hang Seng +0.9%; China’s Shanghai Composite +2.1%
There was a mixed showing from markets in the Asia-Pacific region, but the buying momentum continued in the Nikkei (+0.6%) and the Shanghai Composite (+2.1%), which registered new multi-year highs. Over the last one month, the Nikkei has risen 8.7% while the Shanghai Composite has surged 10.2%.
Economic data
- China
- February House Prices -5.7% year-over-year (prior -5.1%)
- Japan
- February Adjusted Trade Balance -JPY 640 bln (expected -JPY 1.21 tln; prior -JPY 410 bln)
- February Exports +2.4% year-over-year (expected +0.3%; prior +17.0%)
- February Imports -3.6% year-over-year (expected +3.1%; prior -9.0%)
- South Korea
- February Unemployment Rate 3.9% (expected 3.4%; prior 3.4%)
Equity Markets
- Japan’s Nikkei increased 0.6% and ended at its highs for the day. The advance was led by the industrial (+1.1%) and financial (+0.9%) sectors. Top percentage gainers included Mitsumi Electric Co (+7.8%), Taiyo Yuden Co (+7.3%), Alps Electric Co (+6.4%), Sony Corp (+5.4%), and Yamaha Corp (+5.0%). Among the 225 Nikkei members, 147 closed up, 68 closed down, and 10 were unchanged.
- Hong Kong’s Hang Seng jumped 0.9%, paced by gains in all sectors. The consumer cyclical (+1.5%, communications (+1.4%), and energy (+1.2%) sectors were the best-performing areas. The index was led by China Resources Enterprise (+4.6%), Kunlun Energy Corp (+3.5%), and Galaxy Entertainment (+2.2%). Among the 50 Hang Seng members, 41 ended higher, 8 ended lower, and 1 was unchanged.
- China’s Shanghai Composite increased 2.1% and is now up 8.1% in March alone. Buying interest was broad-based and was spurred by speculation further monetary policy stimulus will be provided after a report showed house prices declined 5.7% in February versus a 5.1% decline in January.
- India’s Sensex declined 0.4%. Losses were paced by the industrial (-1.2%) and communications (-1.1%) sectors. NTPC Ltd (-3.3%), Bharat Heavy Electricals (-2.7%), Tata Motors (-2.0%), and Wipro (-1.9%) were the top decliners. State Bank of India (+1.5%) and Reliance Industries (+1.4%) led the gainers and were the only index components to increase at least 1.0%.
- Australia’s S&P/ASX 200 ended flat. The index drew support from strength in the health care (+1.3%), metals & mining (+0.7%), and telecommunication services (+0.6%) sectors. Sirtex Medical (+19.5%) was the best-performing stock on Wednesday.
- Regional advancers: Taiwan +1.2%, Thailand +1.2%
- Regional decliners: South Korea -0.1%, Singapore -0.2%, Indonesia -0.5%, Philippines -0.4%, Vietnam -0.5%
FX
- USD/CNY -0.3% at 6.2287
- USD/INR +0.02% at 62.696
- USD/JPY -0.2% at 121.16
EUROPE
Major European indices trade mostly lower with Italy’s MIB (-1.0%) trailing the region. Elsewhere, The Bank of England released the minutes from its latest policy meeting, revealing that all nine voting members remained firmly entrenched in the ‘no change’ camp.
- Eurozone January trade surplus narrowed to EUR7.90 billion from EUR23.90 billion (expected surplus of EUR15.00 billion)
- UK’s Claimant Count declined by 31,000 (consensus -30,000; last -39,400) while the Unemployment Rate held at 5.7% (consensus 5.6%). Separately, January Average Earnings Index + Bonus +1.8% (expected 2.25; prior 2.1%)
- Italy’s January trade surplus narrowed to EUR220 million from EUR5.77 billion (expected surplus of EUR4.32 billion)
CLOSING PRICES
- UK’s FTSE: + 1.6%
- Germany’s DAX: -0.5%
- France’s CAC: + 0.1%
- Spain’s IBEX: + 0.2%
- Portugal’s PSI: + 0.9%
- Italy’s MIB Index: -0.7%
- Irish Ovrl Index: + 1.4%
- Greece ASE General Index: -4.1%
Macroeconomic Data
Economic Data
from Briefing.com
- MBA Mortgage Index : -3.9% (Prior -1.3%)
- Crude Inventories : 9.622M (Prior 4.512M)
- FOMC Rate Decision : 0.25% (Prior 0.25%)
Market Internals
NYSE:
Higher Volumes than the day before – 883.2M vs 716.0M
Advancers outpaced Decliners (adv/dec): 2556 / 553
New Highs outpaced New Lows (highs/lows): 205 / 66
NASDAQ:
Higher Volumes than the day before – 1971.7M vs 1711.9M
Advancers outpaced Decliners (adv/dec): 1726 / 1048
New Highs outpaced New Lows (highs/lows): 179 / 60
VOLATILITY S&P500 (VIX)
13.97 -1.69 (-10.79%)
Clearly the Fed announcement led the internals to bullishness. VIX took a sharp fall and went below 15.00. Does that mean the market is turning into bulls already?
Technical Updates
18,076.19 +227.11 (+1.27%)
Volume: 130,948,396 (above average of 94,549,499)
Range: 17,697.52 - 18,097.12
4,982.83 +45.39 (+0.92%)
Volume: 473,041,876 (above average of 442,856,124)
Range: 4,907.72 - 5,001.57
Range: 4,907.72 - 5,001.57
S&P 500 INDEX (SPX: CBOE)
2,099.50 +25.22 (+1.22%)
Volume: 628,925,000 (above average of 527,724,738)
Range: 2,061.23 - 2,106.85
From the candlestick pattern, it looks like bullish engulfing. However it appears to me that the three indices are at their respective resistance levels. MACD is indicating a change of sentiment into bullishness soon.
Commodities
Closing Commodities: Gold And Silver Rally On Fed Statement As Dollar Index Tanks
- Following the Fed statement, the dollar index swiftly dropped to a new low for today, which provided support to select commodities
- The dollar index is down about 1.6% currently and remains near today’s new low, which is helping support select commodities
- Gold and silver spiked as a result, while crude oil climbed higher
- Apr gold closed pit trading $3.20 higher at $1151.10/oz, but rallied above $1172/oz after the Fed statement
- May silver closed flat at $15.53/oz, but surged above $16/ox post-Fed
- Natural gas was already up notably ahead of tomorrow’s EIA weekly storage report
- Apr nat gas closed $0.06 higher at $2.92/MMBtu
- Copper, on the other hand, was in the red all day. May copper finished the session $0.08 lower at $2.56/lb, but rallied as high as $2.61/lb post-Fed
Energy Price Action
- May crude oil futures rose $1.49/barrel to $46.67/barrel
- Apr natural gas closed $0.06 higher at $2.92/MMBtu
- RBOB Gasoline closed $0.07 higher at $1.80/gallon
- Heating oil closed $0.08 higher at $1.77/gallon
Note:
- Crude Oil: Crude oil inventories saw a build of 9.622 mln (vs. consensus of 4.1 mln); Gasoline inventories saw a draw of -4.73 mln (vs. consensus of a draw)
- Also, the Crude Oil front month contract rolled over to May
Agricultural Price Action
- May corn closed $0.04 higher at $3.75/bushel
- May wheat closed $0.07 higher at $5.11/bushel
- May soybeans closed $0.08 higher at $9.64/bushel
- Ethanol closed $0.04 higher at $1.46/gallon
- Sugar #11 closed 0.09 cents lower at 12.73 cents/lb
Metals Price Action
- Apr gold ended today’s session $3.20 higher at $1151.10/oz
- May silver closed flat at $15.53/oz
- May copper closed $0.08 lower at $2.56/lb
Currencies
- The Dollar Index is trading just below the 100 level as we get set for the latest Fed installment. A full slate for the FOMC in which we get a statement, updated forecasts, and a Fed Chair Yellen press conference. Expectations are for Ms. Yellen to remove the ‘patient’ language which would signal a slight tightening of policy. However there are a number of variables including the GDP, Inflation, and Employment projections. In addition, markets will be curious if the recent strengthening of the dollar will also impact Fed policy. This will lead to some potential volatility in currency markets this afternoon. The DXY is holding at 99.60 ahead of today’s events.
- The euro is attempting to hold the 1.06 level. Trade data from the region was disappointing as imports fell, as widely expected, but exports rose well below expectations. A weakening euro was expected to provide more of a boost. In addition, headlines between Greece and the EU continue to show a difficult negotiating environment between the two sides.
- The pound has tumbled to fresh multi year lows and has now fallen 4.5% against the dollar over the past week. The latest Bank of England minutes were released and the group voted unanimously to keep rates unchanged. In addition Employment data disappointed. This has many believing the weakness in the Euro region is hurting the U.K. and will cause a further pause in a rate hike by the BoE. The country also is digesting the latest government budget proposal released today.
- The yen has been able to push into the higher end of the 121 range as we see a small move to risk off ahead of today’s announcement. Japan saw a lower than expected Trade deficit in data released last night. But there is still plenty of uncertainty over the next direction by the Bank of Japan. This has left yen trading in a relatively tight range against the dollar over the past few weeks. 118-120 continues to set up as a key area for yen moving forward (BONDX, FOREX).
Treasuries Soar on Fed:
- Treasuries of all maturities made massive gains today, following an FOMC statement that the market construed to be quite dovish. The only asset that didn't rally was the U.S. dollar
- The belly of the curve led prices up, with the 5-year note yield falling 17 bps to 1.38%
- Yield check:
- 2-yr: -13 bps to 0.54%
- 5-yr: -16 bps to 1.39%
- 10-yr: -13 bps to 1.92%
- 30-yr: -9 bps to 2.51%
- News:
- The Fed removed the word patient from its statement, as many Fed watchers had expected. Other parts of the statement led the market to interpret the statement as dovish
- The FOMC believes that "economic growth has moderated somewhat" since its January meeting
- "...the Committee judges that an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting."
- "export growth has weakened"
- "Inflation has declined further below the Committee's longer run objective"
- Economic Projections:
- Fed sees GDP of 2.3-2.7% for FY15 and FY16
- Fed sees PCE inflation of 0.6-0.8% for FY15, 1.7-1.9% for FY16
- Press Conference:
- Cannot rule out an increase in June
- Most of the FOMC believes it will be appropriate to raise rates this year
- Dollar 'at this point' looks like it is providing 'transitory' pressure on imports
- The Fed removed the word patient from its statement, as many Fed watchers had expected. Other parts of the statement led the market to interpret the statement as dovish
- Commodities:
- WTI Crude rallied to $46.94/bbl after falling as low as $44.03/bbl on the weekly inventory data at 10:30 ET (build of 9.6M barrels versus 4.0M the week prior)
- Gold rallied in sympathy with the falling dollar, up $20.70 (1.8%) to $1168.9/troy oz.
- Copper fell 2 cents to $2.61/lb.
- Currencies:
- The U.S. Dollar Index fell 171 ticks (1.72%) to 97.88
- EUR/USD: +222 pips (2.10%) $1.0816
- USD/JPY: -1.13 (-0.93%) to 120.20
- Data Out Tomorrow:
- Initial and Continuing Jobless Claims (08:30 ET)
- Q4 Current Account Balance (08:30 ET)
- March Philadelphia Fed (10:00 ET)
- February Leading Economic Indicators (10:00 ET)
- Natural Gas Inventories for the week ending 3/14 (10:30 ET)
- New Supply:
- $13 billion 10-Year Treasury Note Auction (reopening) (13:00 ET)
Treasury Yields:
- 2 Year Note 0.57% -0.13
- 5 Year Note 1.41% -0.15
- 10 Year Note 1.93% -0.13
- 30 Year Bond 2.51% -0.10
2/30 Spread: 194 bps ( +3 ) … 2/10 Spread: 136 bps ( UNCH )
Preview for Thursday 19 Mar, 2015
Thursday (19 Mar) :
- Initial Claims : 294K (Prior 289K)
- Continuing Claims : 2420K (Prior 2418K)
- Current Account Balance : -$105.0B (Prior -$100.3B)
- Philadelphia Fed : 7.2 (Prior 5.2)
- Leading Indicators : 0.2% (Prior 0.2%)
- Natural Gas Inventories : (Prior -198bcf)
Earnings Highlights
Thursday (19 Mar) :
BMO - CRCM CATO DANG LEN MCS MIK PERY TECD TNP VNCE
BMO - CRCM CATO DANG LEN MCS MIK PERY TECD TNP VNCE
AMC - CTRP EXA HGR INGN MFRM NWY NKE ZQK RALY TCPI VCYT VTL YOKU ZFGN
Summary
As expected the FOMC update gave the market a huge volatility. Now we have to see if the rally is going to continue. Tomorrow we will be having the unemployment numbers and the leading indicators that might give the market another surprise (although unlikely I think).
With the sharp spike on Wednesday, there might be some profit taking before the run continues.
With the sharp spike on Wednesday, there might be some profit taking before the run continues.
Direction for Thursday 19 Mar, 2015; Up
2015 Daily Directional Accuracy: 18/37 (48.65%)
2015 Weekly Directional Accuracy: 5/8 (62.50%)
2015 Weekly Directional Accuracy: 5/8 (62.50%)
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