Modest gains in morning trade burned off by the afternoon
Wednesday after the Federal Reserve released minutes from its
June policy meeting.
The notes show that most Fed officials are concerned that the
U.S. economy could worsen if tax hikes and federal spending cuts
that are set to go into effect at year's end take place. They
said the economy should grow modestly but that Europe's debt
crisis could hinder improvement. The Fed lowered its growth
forecast at the meeting as a result of weaknesses in the job
market and consumer spending.
In afternoon trade,SPDR S&P 500 (
) lost 0.21%. It had gained as much as 0.33% in the first hour of
SPDR Dow Jones Industrial Average (
) fell 0.60%.
PowerShares QQQ (
), a basket of the largest-100 non-financial stocks on the
Nasdaq, dropped 0.87%.
Both DIA and QQQ broke below key support at their 50-day
moving average while the SPY sits right on that line.
"The trend is now firmly down until proven otherwise as we now
have lower highs and lower lows in the month of July,"
ETFGuide.com told its clients in a daily briefing after Tuesday's
close. "The bulls could not hold any of the low-volume up moves
of last week and have given up all those gains and then some,
including another key resistance rejection at $1362 (on the
That level translates to $136.20 for the SPY.
Market breadth readings suggest an uptrend is likely to
continue next month after chopping sideways in July, says Tom
McClellan of the McClellan Market Report wrote in his daily
"July of an election year is typically a sideways month for
the stock market, especially with a Democrat in the White House,
as investors wait for the parties' conventions to see which way
the election winds are blowing," McClellan wrote in his daily
newsletter. "A consolidation for the rest of this month should
lead to a bottom to go up from that is due Aug. 7."
IShares MSCI EAFE Index (
), tracking developed foreign markets, was flat.
IShares MSCI Emerging Markets Index (
) ticked up 0.1%.
Foreign stocks will be trapped in a trading range the rest of
the summer and underperform U.S. stocks, says Alec Young, global
equity strategist at S&P Capital IQ.
"Increased global monetary policy easing and reasonable
valuations limit (the) downside, in our view, but we think
ongoing European uncertainty, slowing BRIC (Brazil, Russia, India
and China) gross domestic product growth and a lack of progress
on the U.S. fiscal cliff likewise limit upside potential," Young
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