Thursday, December 17, 2015, 12:35 PM, EST
On the day following the first rate hike since 2006, US stocks have given back roughly half of yesterday's gains. The US Dollar is experiencing its biggest gain in over a month, and once again pressuring commodity prices. Energy stocks are lower by roughly 1.8% with crude oil back below $35. DOW -0.7%, S&P 500 -1.0%, Nasdaq -0.6%, R2000 -0.7%
- The US economy has benefited from the low borrowing costs since the financial crisis, and yesterday's move by the Fed is an indication the committee believes consumers can endure higher rates. Declining commodity prices and global weakness may be hurdles in 2016 for the committee to maintain its “gradual” increase plan. Currency traders have been supporting the US dollar over in 2015, pushing the US Dollar Index higher by 9.8% ytd, anticipating a hike this year.
- Weekly jobless claims number fell by 11k to 271k and beat economists’ expectations. Average weekly figure this year has been at its lowest level since 1973, reinforcing the positive labor market.
- Only 14% of the S&P is trading higher this morning, but there are a few bright spots. Micron Technology is up 2.5%, after an upgrade from Morgan Stanley. The firm believes the stock could see potentially 30% of upside next year in the recent pullback has created a compelling buying opportunity. FedEx is also seeing upside after reporting profits that exceeded expectations, helped by holiday spending on by e-commerce purchases.
As of 11:30 AM EST, Nasdaq Composite:
- Advancers: 810
- Decliners: 1482
- Advance Volume: 33MM shares
- Decline Volume: 97MM shares
- New 52 week Highs (prior close): 50
- New 52 week Lows (prior close): 112
The equity market seemed to have gotten everything they were looking from in the FOMC outcome (dovish statement on future pace of increases with unanimous vote on rate hike decision) and naturally rallied on the removal of the uncertainty yesterday. That has not stopped the market from changing its mind today, fading early strength and having given back almost all of the prior session’s gains as we write. We expect that there may be some volatility in coming days or even weeks as the market changes from a ZIRP mindset, possibly revaluing securities. The one positive we can point to today is that the small caps are outperforming but this may somewhat artificial based on the US dollar strength.
- For the S&P 500 Index (SPX), despite the solid rally and close yesterday, from a technical perspective nothing has changed in our eyes. In order for that to happen we would need to see either decisive closes above 2110 to the upside or below 1995 to the downside. For the day 2045/40 may be watched for support near with 2020 next. Though the Index did close above its 200 day moving average, we should highlight that the slope of the MA is negative, perhaps indicating stocks are entering a sideways market or more bearish environment; too early to say but worth noting. The last time the SPX’s 200 DMA was negatively sloped was September to February 2011, but the difference was that was early in the cyclical bull market.
- The NASDAQ Composite Index (CCMP) is also having a tough session though it’s fairing slightly better given the heavier constituency of small cap issues vs the SPX. It’s also interesting to know that even with yesterday’s big rally, new 52 week lows outpaced new 52 week highs by more than a factor of two. Market participants should watch to see if indicators like this become directionally supportive of the price trend. In terms of the more definitive break out and break down levels for the CCMP, 5160 should be watched to the upside and 4905 to the downside.
The Nasdaq's Market Intelligence Desk (MID) Team includes:
Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.
Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.
Vincent Randazzo, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 13 years of experience in equity markets having served in equity research sales and desk analyst roles at major banks. Vincent’s specific expertise is in technical analysis and has been a Chartered Market Technician (CMT) since 2007.
Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.
Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.