30 Jul 2014 AMC - Market ended mixed as FOMC tapers another $10b
Market Summary
European Markets Closing Prices
European markets are now closed; stock markets across Europe performed as follows:
- UK's FTSE: -0.5%
- Germany's DAX: -0.6%
- France's CAC: -1.2%
- Spain's IBEX: + 0.3%
- Portugal's PSI: -3.3%
- Italy's MIB Index: -0.9%
- Irish Ovrl Index: -0.7%
- Greece ASE General Index: -0.1%
Before Market Opens
S&P futures vs fair value: +7.20. Nasdaq futures vs fair value: +23.00.
The S&P 500 futures trade seven points above fair value.
Asian markets ended the day on a mostly higher note. Japan's weak preliminary Industrial Production report (-3.3% month-over-month versus expected -1.0%) prompted the Ministry of Economy, Trade, and Industry to lower its industrial assessment.
S&P futures vs fair value: +7.20. Nasdaq futures vs fair value: +23.00.
The S&P 500 futures trade seven points above fair value.
Asian markets ended the day on a mostly higher note. Japan's weak preliminary Industrial Production report (-3.3% month-over-month versus expected -1.0%) prompted the Ministry of Economy, Trade, and Industry to lower its industrial assessment.
- In other data:
- South Korea's Industrial Production rose 2.9% month-over-month (expected 0.7%, previous -2.8%), while the year-over-year reading increased 0.6% (consensus 0.8%, previous -2.1%). Separately, Retail Sales ticked up 0.3% month-over-month (forecast 0.6%, prior 1.4%)
- New Zealand's Building Consents increased 3.5% month-over-month (previous -4.4%)
- Japan's Nikkei added 0.2%, closing at its best level in more than six months. Solid earnings reports provided support with Mitsubishi Electric rallying 3.4% following its beat and Honda Motor gained 3.1% after providing upbeat guidance.
- Hong Kong's Hang Seng rose 0.4%, gaining for a seventh straight day as trade contends with its best levels in more than six years. Property stocks continued to see strength as Hang Lung Properties and Sun Hung Kai Properties jumped 3.4% and 3.2%, respectively.
- China's Shanghai Composite slipped 0.1% for the first time in seven sessions. Real estate giant Poly Real Estate was a laggard, tumbling 5.5%.
- Participants received several data points:
- Eurozone Business and Consumer Survey ticked up to 102.2 from 102.1 (expected 101.8) as Business Climate held steady at 0.2, as expected, while Consumer Confidence slipped to -8.0 from -7.5, as expected. Separately, Industrial Sentiment ticked up to -4.0 from -4.3 (consensus -5.0)
- French Consumer Confidence held steady at 86, as expected
- Spain's GDP rose 0.6% quarter-over-quarter (expected 0.5%, previous 0.4%), while the year-over-year reading increased 1.2% (consensus 1.1%, prior 0.5%). Separately, CPI slipped 0.3% year-over-year (expected 0.2%, prior 0.1%)
- Great Britain's FTSE is lower by 0.1% with miners showing weakness. Antofagasta is lower by 2.9% and BHP Billiton holds a loss of 1.3%. Barclays leads with a gain of 4.3% after providing an upbeat on its cost-cutting efforts.
- In France, the CAC holds a loss of 0.1%. Industrials Legrand and Schneider Electric underperform with respective losses of 1.4% and 2.9%. Airbus is the top performer, up 4.3%.
- Germany's DAX is higher by 0.2% with support from drug makers. Bayer and Merck are higher by 2.9% and 2.2%, respectively. Infineon Technologies has tumbled 4.3% despite reporting strong results.
- Spain's IBEX outperforms with an increase of 0.9% with banks showing strength. Bankinter, BBVA, and Caixabank are up between 1.5% and 1.9%.
U.S. Equities
Asia
- Equity futures suggest strong gains at the open following the better than expected Q2 GDP-Adv. (4.0% actual v. 3.2% expected)
- Technology is set to outperform with Twitter (TWTR) up ~%% following its earnings beat
- The VIX (13.28) finished yesterday's session with its second highest close since May
- MBA Mortgage Index (-2.2%)
- ADP Employment Change (218K actual v. 215K expected)
- GDP Deflator-Adv (2.0% actual v. 2.1% expected)
- S&P Futures +9 @ 1972
- Dow Futures +62 @ 16,907
- Nasdaq Futures +24 @ 3976
- Markets gained across most of Asia
- Japan's weak preliminary industrial production (-3.3% MoM actual v. -1.0% MoM expected) data prompted the Ministry of Economy to lower its industrial assessment
- Japan's Nikkei (+0.2%) closed at its best level in more than six months
- Hong Kong's Hang Seng (+0.4%) gained for a seventh straight day as trade contends with its best levels in more than six years
- China's Shanghai Composite (-0.1%) slipped for the first time in seven sessions
- India's Sensex (+0.4%) ended just shy of all-time highs
- Australia's ASX (+0.6%) finished at its best levels since June 2008
Market Internals
Market Internals -Technical-
The Nasdaq closed up 20 (+0.45%) at 4463, the S&P 500 closed flat at 1970, and the Dow closed down 32 (-0.19%) at 16880. Action came on slightly above average volume (NYSE 667 mln vs. avg. of 651; NASDAQ 1734 mln vs. avg. of 1669), with mixed advancers/decliners (NYSE 1214/1914, NASDAQ 1599/1106) and new highs outpacing new lows (NYSE 91/55, NASDAQ 56/54).
Relative Strength:
Russia-RSX +2.56%, Social Media-SOCL +2.14%, Volatility-VXX +1.61%, Eastern Europe-ESR +1.61%, Internet Composite-FDN +1.52%, Base Metals-DBB +1.47%, Biotechnology-XBI +1.44%, Spain-EWP +0.98%, South Korea-EWY +0.75%, Netherlands-EWN +0.65%.
Relative Weakness:
Turkey-TUR -1.95%, Cotton-BAL -1.92%, Poland-EPOL -1.86%, Chile-ECH -1.85%, Indonesia-IDX -1.69%, Utilities-XLU -1.69%, South Africa-EZA -1.65%, Nuclear Energy-NLR -1.47%, Copper Miners-COPX -1.44%, 20+ Year Treasuries-TLT -1.39%.
Leaders and Laggards
Technical Updates
Briefing's Commentaries
Closing Market Summary: Q2 GDP Beats; Small Caps Rally; and Fed Tapers Again
The stock market ended the Wednesday session on a mixed note with small caps displaying relative strength. The Nasdaq Composite (+0.5%) and Russell 2000 (+0.4%) registered modest gains, while the Dow Jones Industrial Average (-0.2%) and S&P 500 (+0.01%) underperformed.
Despite the mixed finish, the key indices traded higher across the board at the start of the session after the advance reading of second quarter GDP surpassed estimates (4.0% versus Briefing.com consensus 3.2%). However, the early strength was short-lived with the S&P 500 sliding into red during the opening 90 minutes of action.
One could argue that the inability to rally on a strong data point and better than expected earnings resulted from concerns about a potential fed funds rate hike taking place sooner than expected. To that point, Treasuries spent the session in a steady retreat and finished near their lows. The 10-yr note fell 26 ticks, sending its yield higher by nine basis points to 2.55%.
However, the jitters about a swift rate hike should have been partially calmed by today's policy statement from the FOMC, which was very similar to the June directive. The Fed lowered the size of monthly asset purchases to $25 billion and reiterated that participants saw continued "significant underutilization" of labor resources. Household spending was described as "rising moderately," while the housing sector continued recovering at a slow pace.
Despite the familiar undertone, there was a slight change in the portion of the statement dealing with inflation. Specifically, the directive acknowledged that "the likelihood of inflation running persistently below two percent has diminished somewhat," while the prior statements focused on the potential risks stemming from inflation running below the two-percent target.
The statement did not receive unanimous support with Philadelphia Fed President Charles Plosser dissenting due to his view that the guidance is time dependent and does not reflect the considerable economic progress that has been made already.
When the dust settled, five sectors posted gains, while the other five finished in the red. Cyclical groups displayed broad strength at the open, but finished the trading day on a mixed note.
Heavily-weighted consumer discretionary (+0.6%) and financial (+0.4%) sectors hovered near their flat lines into the afternoon, but surged to the top of the leaderboard shortly after the release of the FOMC statement. In the financial sector, American Express (AXP 90.91, -0.80) lost 0.9% despite reporting better than expected earnings.
Meanwhile, the discretionary space was supported by retailers, while homebuilders slumped. The SPDR S&P Retail ETF (XRT 85.07, +0.83) added 1.0%, narrowing its July loss to 2.0%. For its part, the iShares Dow Jones US Home Construction ETF (ITB 22.59, -0.17) lost 0.8% as higher interest rates weighed.
Elsewhere, the industrial sector (+0.1%) was a notable laggard during the early portion of the session, but sprung to life in the afternoon. Transport stocks fueled the move with the Dow Jones Transportation Average climbing 0.7%. CH Robinson (CHRW 68.53, +4.12) paced the rally with a 6.4% gain after beating bottom-line estimates.
Also of note, the top-weighted sector—technology (+0.3%)—received support from chipmakers as the PHLX Semiconductor Index advanced 1.0%, which gave a boost to the Nasdaq Composite.
The tech-heavy Nasdaq also benefitted from a rally among biotech names. Amgen (AMGN 130.01, +6.70) surged 5.4% following its strong earnings and guidance, while the iShares Nasdaq Biotechnology ETF (IBB 257.25, +2.47) rose 1.0%.
The outperformance of biotech helped keep the health care sector (+0.4%) in the green even as some large cap components displayed relative weakness. WellPoint (WLP 112.47, -0.08) shed 0.1% despite beating estimates, while Humana (HUM 120.34, -7.18) lost 5.6% in reaction to an in-line report.
Another countercyclical sector—utilities—ended at the bottom of the leaderboard with a loss of 1.7% that was likely due in part to the increase in Treasury yields.
Today's participation was an improvement when compared to recent sessions, but remained below average with less than 670 million shares changing hands at the NYSE.
Economic data included the weekly MBA Mortgage Index, ADP Employment Change, and the Q2 GDP report:
The stock market ended the Wednesday session on a mixed note with small caps displaying relative strength. The Nasdaq Composite (+0.5%) and Russell 2000 (+0.4%) registered modest gains, while the Dow Jones Industrial Average (-0.2%) and S&P 500 (+0.01%) underperformed.
Despite the mixed finish, the key indices traded higher across the board at the start of the session after the advance reading of second quarter GDP surpassed estimates (4.0% versus Briefing.com consensus 3.2%). However, the early strength was short-lived with the S&P 500 sliding into red during the opening 90 minutes of action.
One could argue that the inability to rally on a strong data point and better than expected earnings resulted from concerns about a potential fed funds rate hike taking place sooner than expected. To that point, Treasuries spent the session in a steady retreat and finished near their lows. The 10-yr note fell 26 ticks, sending its yield higher by nine basis points to 2.55%.
However, the jitters about a swift rate hike should have been partially calmed by today's policy statement from the FOMC, which was very similar to the June directive. The Fed lowered the size of monthly asset purchases to $25 billion and reiterated that participants saw continued "significant underutilization" of labor resources. Household spending was described as "rising moderately," while the housing sector continued recovering at a slow pace.
Despite the familiar undertone, there was a slight change in the portion of the statement dealing with inflation. Specifically, the directive acknowledged that "the likelihood of inflation running persistently below two percent has diminished somewhat," while the prior statements focused on the potential risks stemming from inflation running below the two-percent target.
The statement did not receive unanimous support with Philadelphia Fed President Charles Plosser dissenting due to his view that the guidance is time dependent and does not reflect the considerable economic progress that has been made already.
When the dust settled, five sectors posted gains, while the other five finished in the red. Cyclical groups displayed broad strength at the open, but finished the trading day on a mixed note.
Heavily-weighted consumer discretionary (+0.6%) and financial (+0.4%) sectors hovered near their flat lines into the afternoon, but surged to the top of the leaderboard shortly after the release of the FOMC statement. In the financial sector, American Express (AXP 90.91, -0.80) lost 0.9% despite reporting better than expected earnings.
Meanwhile, the discretionary space was supported by retailers, while homebuilders slumped. The SPDR S&P Retail ETF (XRT 85.07, +0.83) added 1.0%, narrowing its July loss to 2.0%. For its part, the iShares Dow Jones US Home Construction ETF (ITB 22.59, -0.17) lost 0.8% as higher interest rates weighed.
Elsewhere, the industrial sector (+0.1%) was a notable laggard during the early portion of the session, but sprung to life in the afternoon. Transport stocks fueled the move with the Dow Jones Transportation Average climbing 0.7%. CH Robinson (CHRW 68.53, +4.12) paced the rally with a 6.4% gain after beating bottom-line estimates.
Also of note, the top-weighted sector—technology (+0.3%)—received support from chipmakers as the PHLX Semiconductor Index advanced 1.0%, which gave a boost to the Nasdaq Composite.
The tech-heavy Nasdaq also benefitted from a rally among biotech names. Amgen (AMGN 130.01, +6.70) surged 5.4% following its strong earnings and guidance, while the iShares Nasdaq Biotechnology ETF (IBB 257.25, +2.47) rose 1.0%.
The outperformance of biotech helped keep the health care sector (+0.4%) in the green even as some large cap components displayed relative weakness. WellPoint (WLP 112.47, -0.08) shed 0.1% despite beating estimates, while Humana (HUM 120.34, -7.18) lost 5.6% in reaction to an in-line report.
Another countercyclical sector—utilities—ended at the bottom of the leaderboard with a loss of 1.7% that was likely due in part to the increase in Treasury yields.
Today's participation was an improvement when compared to recent sessions, but remained below average with less than 670 million shares changing hands at the NYSE.
Economic data included the weekly MBA Mortgage Index, ADP Employment Change, and the Q2 GDP report:
- Second quarter GDP increased 4.0% in the advance release after declining an upwardly revised 2.1% (from -2.9%) in Q1 2014. The Briefing.com consensus expected GDP to increase 3.2%
- Real final sales, which fell 1.0% in the first quarter, rebounded and increased 2.3%. That is still well off the pace from the second half of 2013 when real final sales increased 3.0% and 3.9%, respectively, in the third and fourth quarters
- Simply put, all the predictions for 2014 economic growth that were based on the second half 2013 rebound proved to be faulty. Last year's gains were not sustainable
- Inventories added 1.66 percentage points to GDP growth in second quarter after subtracting 1.16 percentage points in Q1 2014
- According to the ADP National Employment Report, employment in the nonfarm private business sector rose 218K in July, while the Briefing.com consensus expected an increase of 215K
- The June reading was left unrevised at 281,000
- The weekly MBA Mortgage Index fell 2.2% to follow last week's increase of 2.4%
- S&P 500 +6.6% YTD
- Nasdaq Composite +6.9% YTD
- Dow Jones Industrial Average +1.8% YTD
- Russell 2000 -1.5% YTD
Commodities
Closing Commodities: Crude Falls 0.6%, Drops Below $100/Barrel In Electronic Trade
- Aug gold fell into negative territory in morning action as the dollar index strengthened after an advance GDP reading showed a 4.0% expansion during Q2 (Briefing.com consensus expected GDP to increase 3.2%). The move lower also came ahead of the latest policy statement from the FOMC released at 14:00 ET. The yellow metal slipped from its session high of $1303.00 per ounce and spent the remainder of the session trading in the red. It eventually settled with a 0.3% loss at $1294.80 per ounce.
- Sep silver popped to a session high of $20.67 per ounce in morning trade after trading as low as $20.48 per ounce earlier in the session. The move was short lived, however, as it quickly retreated towards the unchanged line and settled just 1 cent higher at $20.59 per ounce.
- Sep crude oil fell for a third consecutive session despite better-than-anticipated inventory data. The energy component advanced to a session high of $101.67 per barrel when the EIA reported that crude oil inventories had a draw of 3.7 mln barrels when consensus called for a draw of 1.2-1.5.
- However, prices quickly turned negative and trended lower for the remainder of the session, leaving crude oil to settle with a 0.6% loss at $100.27 per barrel.
- In electronic trade, Sept crude oil just hit a new LoD of $99.57/barrel and is -1.3% at $99.63/barrel
- Sep natural gas traded in the red today, dipping to a session low of $3.75 per MMBtu. Unable to find buying support, it settled with a 1.0% loss at $3.78 per MMBtu.
- Gold fell into negative territory from its session high of $1303.00 in morning action as the dollar index strengthened after an advance GDP reading showed a 4.0% expansion during Q2 (Briefing.com consensus expected GDP to increase 3.2%). In addition, investors await the latest policy statement from the FOMC expected to come out at 14:00 ET. The yellow metal spent the remainder of the session trading in the red and settled with a 0.3% loss.
- Silver popped to a session high of $20.67 in morning pit trade after trading as low as $20.48 earlier in the session. However, it quickly retreated towards the unchanged line and eventually settled just 1 cent higher.
CBOT Agriculture and Ethanol/ICE Sugar Closing Prices
- Sep corn settled unchanged at $3.62/bushel
- Sep wheat rose 7 cents to $5.28/bushel
- Aug soybeans fell 7 cents to $12.22/bushel
- Sep ethanol fell 4 cents to $2.04/gallon
- Sep sugar (#16 (U.S.)) rose 0.03 of a penny to 24.68 cents/lbs
NYMEX Energy Closing Prices
- Crude oil fell for a third consecutive session despite better-than-anticipated inventory data. The energy component advanced to a session high of $101.67 on the EIA report that showed crude oil inventories had a draw of 3.7 mln barrels when a smaller draw of 1.2-1.5 mln barrels was expected. However, prices quickly turned negative and trended lower for the remainder of the session. Crude oil eventually settled with a 0.6% loss.
- Natural gas traded in the red today, dipping to a session low of $3.75. Unable to find buying support, it settled with a 1.0% loss.
Treasuries
Yields Surge as GDP Prints 4.0% and the Fed Tapers: 10-yr: -25/32..2.555%..USD/JPY: 102.84..EUR/USD: 1.3391
- Treasuries were hit hard, pressured by the stronger than expected Q2 GDP-Adv. (4.0% actual v. 3.2% expected) report. Click here to see an intraday yields chart.
- Other data saw the MBA Mortgage Index dip -2.2% and ADP Employment Change print 218K (215K expected).
- Maturities held small losses into this morning's release before the better than expected growth pressed the complex to its lows.
- Steady selling would persist into this afternoon's average $29 bln 7y note auction.
- The auction drew 2.250% (WI 2.245%) and a 2.58x bid/cover. A light direct bid (15.2%) was supported by a larger than usual indirect takedown (47.3%), leaving primary dealers with 37.5% of the supply.
- Treasuries drifted near session lows into the FOMC rate decision, which produced another $10 bln taper to the Fed's asset purchase program.
- Notable were comments indicating "a range of labor market indicators suggests that there remains significant underutilization of labor resources" and that "the likelihood of inflation running persistently below 2 percent has diminished somewhat."
- Maturities finished near their worst levels of the session following an initial post-FOMC bid.
- Up front, the 2y finished @ 0.559%, its highest since May 2011. The yield threatened the 0.600% level, but was unable to retake the mark.
- In the belly, the 5y climbed +8.3bps to 1.769%. Action closed at a four-month high after probing 1.800% and flirting with its highest close of 2014.
- The 10y jumped +9.2bps to 2.554%. Today's selling ran the benchmark yield to a three-week high as action reclaimed the 50 dma.
- At the long end, the 30y added +8.8bps to 3.310%. Weakness wiped away nearly two weeks of gains, and ran the yield off a 13-month low. Resistance near 3.340% will be watched closely in the days ahead.
- Selling swung the curve steeper as the 2-10-yr spread widened to 199.5bps and the 5-30-yr spread expanded to 154bps.
- Precious metals saw a mixed finish as gold slipped -$3 to $1295 and silver gained +$0.03 to $20.61.
- Data: Challenger Job Cuts (7:30), initial and continuing claims, Employment Cost Index (8:30), and Chicago PMI (9:45).
On other news....
FOMC Notable Statements
- Information received since the Federal Open Market Committee met in June indicates that growth in economic activity rebounded in the second quarter. Labor market conditions improved, with the unemployment rate declining further. However, a range of labor market indicators suggests that there remains significant underutilization of labor resources. Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has moved somewhat closer to the Committee's longer-run objective. Longer-term inflation expectations have remained stable.
- Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat.
- $10 bln taper remains the same.
- The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Stanley Fischer; Richard W. Fisher; Narayana Kocherlakota; Loretta J. Mester; Jerome H. Powell; and Daniel K. Tarullo. Voting against was Charles I. Plosser who objected to the guidance indicating that it likely will be appropriate to maintain the current target range for the federal funds rate for "a considerable time after the asset purchase program ends," because such language is time dependent and does not reflect the considerable economic progress that has been made toward the Committee's goals.Statement Regarding Purchases of Treasury Securities
Currencies
Dollar Hits 10-Month High: 10-yr: -20/32..2.539%..USD/JPY: 102.79..EUR/USD: 1.3392
- The Dollar Index remains on session highs near 81.50 after the Fed announced another $10 bln taper to its asset purchase program. Click here to see a daily Dollar Index chart.
- Today's advance has the greenback on track to close at levels last seen in September.
- Notable excerpts from the statement include comments suggesting "a range of labor market indicators suggests that there remains significant underutilization of labor resources" and that "inflation has moved somewhat closer to the Committee's longer-run objective."
- EURUSD is -25 pips @ 1.3385 as trade slides to its lowest levels in nearly nine months. Selling over the course of July has wiped away roughly 300 pips while pushing trade below key 1.3500 support. Eurozone data is heavy as CPI Flash Estimate and the unemployment rate accompany French consumer spending and German retail sales and unemployment change.
- GBPUSD is -30 pips @ 1.6915 as sellers remain in control for a ninth time in ten sessions. Today's weakness has the pair contending with support in the 1.6900 region as action dips to levels last seen in the middle of June. The 100 dma provides further help near 1.6855. Britain's Nationwide Home Price Index is set for tomorrow.
- USDCHF is +20 pips @ .9090 as action flirts with its best levels of 2014. An early KOF Economic Barometer miss has aided by bulls, but trade remains dictated by the euro thanks to the Swiss National Bank's EURCHF1.20 floor.
- USDJPY is +65 pips @ 102.75 as action looks almost surely to put in a ninth straight gain. The overnight industrial production miss in Japan got the buying started with trade managing to briefly probe three and a half-month highs above 103.00 in the aftermath of the Fed decision. Japanese data is limited to average cash earnings.
- AUDUSD is -45 pips @ .9335 as action flirts with its lowest close since the beginning of June. Today's weakness has broken .9350 support before producing a test of the 100 dma (.9315). Australia's building approvals and import prices will cross the wires tonight.
- USDCAD is +40 pips @ 1.0890 as trade rallies to a one and a half-month high. A hotter than expected Raw Materials Price Index (1.1% MoM actual v. 0.6% MoM expected) print has been unable to deter the bulls as action probes resistance defended by the 100 dma. Canada's GDP is scheduled for release tomorrow.
Next Week In View
Economic Commentaries
Economic Data Summary:
- Weekly MBA Mortgage Applications -2.2% vs Briefing.com consensus of ; Last Week was 2.4%
- July ADP Employment Change 218K vs Briefing.com consensus of 215K; June was 281K
- Q2 GDP - Advance 4.0% vs Briefing.com consensus of 3.2%; Q1- Final was revised to -2.1% from -2.9%
- Real final sales, which fell 1.0% in the first quarter, rebounded and increased 2.3%. That is still well off the pace from the second half of 2013 when real final sales increased 3.0% and 3.9%, respectively, in the third and fourth quarters.\
- Simply put, all the predictions for 2014 economic growth that were based on the second half 2013 rebound proved to be faulty. Last year's gains were not sustainable.
- Q2 Chain Deflator - Advance 2.0% vs Briefing.com consensus of 2.1%; Q1- Final was 1.3%
- $10 bln taper to $25 bln
- Information received since the Federal Open Market Committee met in June indicates that growth in economic activity rebounded in the second quarter. Labor market conditions improved, with the unemployment rate declining furtherr. However, a range of labor market indicators suggests that there remains significant underutilization of labor resources. Household spending appears to be rising moderately and business fixed investment is advancing, while the recovery in the housing sector remains slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has moved somewhat closer to the Committee's longer-run objective. Longer-term inflation expectations have remained stable.
- Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators and inflation moving toward levels the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat.
- July Challenger Job Cuts due out Thursday at 7:30 (Briefing.com consensus of ; June was -20.2%)
- Weekly Initial Claims due out Thursday at 8:30 (Briefing.com consensus of 310K; Last Week was 284K)
- Weekly Continuing Claims due out Thursday at 8:30 (Briefing.com consensus of 2.525 M ; Last Week was 2.500 M )
- Q2 Employment Cost Index due out Thursday at 8:30 (Briefing.com consensus of 0.4%; Q1 was 0.3%)
- July Chicago PMI due out Thursday at 9:45 (Briefing.com consensus of 61.8; June was 62.6)
- Japan's weak preliminary industrial production (-3.3% MoM actual v. -1.0% MoM expected) data prompted the Ministry of Economy to lower its industrial assessment
Jason's Commentaries
At the start of the market, the market had a bullish start which quickly lost it until 12pm ET, which it held flat until the FOMC statements. As expected, the FOMC tapers another $10b. Yields spiked while the market started to cover their initial shorts. After the FOMC, we're having the employment report coming out on the Friday. Utilities and Staples were the largest laggard last night. Internals were slightly mixed to the upside. However, futures were already down more than 0.6% before Thursday open. It seems that the market is likely to start of with a bearish mood. However, I believe that the market is likely to regain some losses before the employment report.
Market Call: DOWN
Date: 31 July 2014
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