Stocks Mixed Ahead of Fed Decision
- NASDAQ Composite +0.21% Dow -0.14% S&P 500 +0.17% Russell 2000 -0.12%
- NASDAQ Advancers: 1124 Decliners: 1326
- Today’s Volume (vs Tuesday) -5.78%
- Crude $58.57 -$0.67, Gold $1471.30 +$8.70, VIX 15.24 -0.03
Market Movers
- FOMC rate decision today at 2pm ET, followed by Chair Powell’s press conference
- November CPI better at +0.3% vs +0.2% expected growth
- November Core CPI (ex-food, ex-energy) rose +0.2%, in-line with expectations
- Y/o/Y CPI better at +2.1% vs +2.0% consensus
- Y/o/Y Core CPI +2.3%, in-line with expectations
- Weekly MBA Mortgage Application Index +3.8% vs -9.2% decrease last week
- Reaction to earnings: OLLI +17%, PLAY -2%, AEO -7%, GME-20%, PLCE -20%
Chris’ Commentary
Uneventful is what we can say about Tuesday’s trading session as markets closed flat to slightly lower in a very tight range. China-U.S. trade speculation and some mixed economic data gave traders pause. Trading volumes continue to lag with yesterday’s trading volume on the consolidated tape off by about 8% the yearly average.
Today we opened higher with the exception of the Dow, which is being dragged down by Boeing and Home Depot. For those who are curious, the Dow is a price-weighted average when compared to the S&P, Nasdaq and Russell indexes which are all market cap weighted. So to that effect, a company like Boeing with a price of $340 and a market cap of $190 billion carried more weight than both Microsoft and Apple who have market caps of over $1 trillion each.
Still plenty of risk factors ahead with the Fed announcement and press conference later today, U.K. general elections tomorrow, ECB policy meetings and PPI and Retail Sales numbers all later this week.
Currently, nine of the 11 of the S&P 500 sectors are trading higher with Materials and Tech leading. Consumer Discretionary and Real Estate are down slightly. Crude trades slightly lower while gold is higher. The dollar is up today lower while the yield on the 10-yr stands at 1.83%.
IPO’s are in focus today with Aramco making its debut on the Saudi Tadawul exchange with a valuation of nearly $1.9 trillion and on Nasdaq, XP Inc., the Brazilian investment company, listed with a market cap of over $15 billion.
U.S. Consumer Price Index (CPI) increased 0.3% in November, slightly better than polled expectations. Core CPI which excludes food and energy increased by +0.2%, in-line with expectations. Year-over-year CPI increased 2.1%, better than the consensus of a +2.0% increase and up from +1.8% previously reported in October. Core Y/o/Y CPI increased +2.3%, in line with estimates. Real average hourly earnings increased +1.1% in November. Weekly wages increased by 1.1%. The consumer price index (CPI) measures the change in prices paid by consumers for goods and services and thus is a crucial measure of inflation. Today’s report showed a slight increase in prices across most key categories. Consumer inflation data is a focal point for the Federal Reserve and the capital markets.
Sector Recap
Brian’s Technical Take
Follow the money. This afternoon marks the final FOMC meeting for 2019 and one could certainly argue this year’s robust performance in the stock market was largely driven by the Fed’s dovish pivot in January. On the rate front, the Fed is widely expected to stay on the sidelines and do nothing, however we could see additional liquidity measures to increase much needed liquidity in the short term funding markets.
Whether or not the market is satisfied with today’s FOMC and the accompanying policy statement and press conference may be reflected by the greenback’s reaction. The US dollar index (DXY) has trended modestly higher, in relatively narrow ranges, throughout most of 2019, while making its YTD high back on October 1st. It currently stands +1.4% YTD.
Over the last week the DXY has been consolidating along its 200-day simple moving average (yellow line, now 97.68), with another minor support level not far below at the Q4 lows, 97.14. Resistance is above at 98.45.
From a technical perspective this is not the “juicy” setup where you could expect a significant breakout, up or down, from a large, clearly defined trading range. And given its recent history of being reactive vs. proactive, I am not in the camp that the Fed will today provide a catalyst, such as make significant adjustments to the current liquidity programs (repo and T-bill purchases), that would cause a meaningful downward move in the greenback. Yet despite the long term trend of annual gains, up six of the last seven years, long term upside momentum is not there.
The monthly MACD (12, 26) peaked in 2015 and has since making a series of lower highs. After rebounding from negative territory in 2018, the monthly MACD is now close to crossing back down below its signal line (9). The reaction to today’s Fed meeting will not move the MACD needle very far in the short term, but it could get the ball rolling for a prolonged move to the downside let’s say if the Fed steps on the easing/liquidity pedal.
If the Fed “twists” the current bill purchase program further out on the curve or increases it in size, either by being proactive at this meeting or reactive to market forces down the road, then maybe we may see that long term, downside momentum kick in for the greenback as we head into a new decade.
Nasdaq's Market Intelligence Desk (MID) Team includes:
Charles Brown is Associate Vice President on The Market Intelligence Desk with over 20 years of equity capital markets experience. Charlie has extensive knowledge of equity trading on both floor and screen-based marketplaces. Charlie assists with the management of The Market Intelligence Desk and works with Nasdaq listed companies providing them with insightful objective trading analysis.
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.
Brian Joyce, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Before joining Nasdaq, Brian spent 16 years as an institutional trader executing equity and options orders for both the buy side and sell side. He also provided trading ideas and wrote technical analysis commentary for an institutional research offering. Brian focuses on helping Nasdaq’s Financial, Healthcare and Transportation companies, among others, understand the trading in their stock. Brian is a Chartered Market Technician (CMT).
Michael Sokoll, CFA is Associate Vice President 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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