The report from Fed anointed reporter, the WSJ’s Jon Hilsenrath Tuesday was correct the statement interest rates would remain low for a “considerable time”. Tuesday after the market’s closing Hilsenrath modestly retracted his statement to suggest his comments were based on a sense that this report would include that comment.
There’s an old maxim in markets when dealing with Fed releases which includes “the first move’s the wrong move”.
That held true Wednesday as after the statement markets dropped only to rally sharply later. As we tweeted early today, Tuesday (with the Hilsenrath leak) became Wednesday. In a rather defensive move stocks sold-off rather sharply into the close with a gain. Overseas markets were much weaker.
Other news on the day included better earnings from FedEx which beat estimates by 14 cents. Neglected in most reports was the fact the company repurchased 5.3 million shares which accounted for 15 cents of positive earnings. This continues the financial engineering companies are engaging in. Of course FedEx and other companies are merely taking what the Fed is giving them—the ability to borrow cheaply and use the proceeds to buy back shares. This means the company doesn’t invest in long-term growth but just growth in the stock price over the short-term.
Now we move on to the referendum in Scotland where recent polls reflect a no vote as more likely. This could lead to some unrest since yes voters are more passionate and energized.
While most were focused on the Fed, U.S. economic data included a sharp increase for homebuilders as the Housing Market Index jumped to 59 vs 56 expected & prior 55.
The dollar was quite strong which knocked commodity prices lower once again. But if the Fed wants more inflation (as they, not you may calculate it) these lower commodity prices will only lower inflation. Just don’t ask J-Yell why meat prices and overall food prices are soaring.
Leading market sectors higher included: Homebuilders (ITB), REITs (ICF), Financials (XLF), Banks (KBE), Transports (IYT), Small Caps (IWM), Biotech (IBB), Semiconductors (SMH), Dollar (UUP), Materials (XLB) Solar (TAN) and Industrials (XLI),
Leading market sectors lower included: Gold Miners (GDX), Energy (XLE), Japan (EWJ), China (FXI), Hong Kong (EWH), Australia (EWA), Brazil (EWZ), Mexico (EWW), Emerging Markets (EEM), EAFE (EFA), Turkey (TUR), Germany (EWG), UK (EWU), Russia (RSX), Gold (GLD), Crude Oil (USO), Silver (SLV), Base Metals (DBB) and Commodity Tracking ETF (DBC).
The top 20 market movers by percentage change in volume whether rising or falling is available daily.
Volume as usual on a Fed day was higher and breadth per the WSJ was modestly positive.
The financial media doesn’t shine a light on the effects of corporate buybacks financed courtesy of the Fed’s ZIRP policies which allow companies to borrow on the cheap to do this. Of course this benefits holders of all sort but doesn’t grow the core business of the country in the long term. But clearly stock float (supply) is being reduced. Yellen is never asked about this naturally since correspondents only toss softball questions to her.
Now investors turn to Scottish referendum, Alibaba IPO, Jobless Claims and Quadwitching.
Let’s see what happens.
Dave Fry is founder and publisher of ETF Digest and has been covering U.S. and global ETFs since 2001.
He is the author of "Create Your own ETF Hedge Fund: A Do-It-Yourself Strategy for Private Wealth Management" published by Wiley Finance and "The Best ETFs: U.S. Equities, A Companion Guide to Building Your ETF Portfolio".
Disclaimer: The charts and comments are only the author's view of market activity and aren't recommendations to buy or sell only any security. Market sectors and related ETF's are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotation's aren't predictive of any future market action rather they only demonstrate the author's opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com
|WTI Crude Futr||93.02||-1.40||-1.48 %||17:15|
|US Dollar||84.38||-0.02||-0.03 %||17:00|
|Brazil||2423.602||-2.23 %||-9.98 %||9.26 %|
|Russia||645.030||-0.32 %||-0.59 %||-18.03 %|
|India||514.416||1.65 %||1.21 %||26.30 %|
|China||64.905||-0.88 %||-1.85 %||2.86 %|