Views From The Hill

Tuesday’s Markets Pause for the Fed’s Cause

The markets appear to have hit the pause button as they await the outcome of today’s start of the FOMC’s 2-day meeting and this Sunday’s presidential election in France. Who knows what will happen with the French election. Trump’s presidential victory and Brexit vote remind all of us that anything is possible. However, with respect to interest rates, the market is assigning a 95% probability that the FOMC will not change its target range for interest rates on Wednesday. If so, then we’ll just have to kick the can further down to June and see what its outlook might be going forward.

Today’s US economic calendar was absent of any market moving events, but the day was not without importance. Asia-Pacific’s central banks maintained the status quo on their monetary and interest rate policies. Meanwhile, Europe’s Services and Manufacturing business climate continues to indicate more growth ahead, while similar conditions exists in Asia’s Japan and India as well.

 

Economy

Central Banks

  • Asia-Pacific / Japan: The Bank of Japan (BOJ) released its minutes from its last monetary policy meeting. As expected, it kept rates unchanged, along with the annual Y80 trillion pace of its purchase of JGBs.
  • Asia-Pacific / Australia: The Reserve Bank of Australia (RBA) left rates unchanged @ 1.5%.

 

Services & Manufacturing

  • Asia / Japan: Japan’s PMI Composite for April-2017 declined from its 19-month high @ 52.9 to 52.6, while its Services also pulled back from 52.9 to 52.2.
  • Asia-Pacific / India: India’s PMI Manufacturing Index for April-2017 was unchanged @ 52.7 and remains in expansion mode.
  • Europe / Eurozone: Europe’s PMI Manufacturing Index for April-2017 increased to 56.7 vs prior @ 56.2 and consensus @ 56.8.
  • Europe / Switzerland: Swiss PMI Manufacturing Index indicates robust business conditions still abound, as indicated by the 57.4 level vs prior @ 58.6 and consensus @ 58.2.
  • Europe / France: PMI Manufacturing Index for April-2017 remains in expansive mode @ 55.1 vs consensus @ 55.1 and prior @ 53.3.
  • Europe / Germany: PMI Manufacturing Index April-2017 @ 58.2 in line with consensus and just slightly under previous @ 58.3. Business conditions remain extremely strong.
  • Europe / UK: April-2017 saw one of the bigger gains for the CIPS/PMI Manufacturing Index, which registered 57.3 vs consensus @ 54.0 and prior @ 54.2.

 

Market Direction Notes

Equities

  • The SP-500 and DJ-30 Industrials continue their consolidation, with the latter leaning towards bearish patterns.
  • The Nasdaq-100 and Nasdaq Composite hit some pockets of resistance selling, but not before making new all-time highs and closing in the upper end of their trading ranges.
  • The bearish reversal pattern for the Russell-2000 became more pronounced with a new 6-day low.

 

Positive Earnings or Guidance

  • Tenet Healthcare Corp (THC) reported Q1 adjusted EPS @ (-0.27) vs consensus @ (-0.52); and guided full-year adjusted EPS @ $1.05 – $1.30 vs consensus @ $1.13.
  • Advanced Micro Devices (AMD) reported Q1 revenue @ $984mm vs consensus @ $984.5mm.

 

Negative Earnings or Guidance

  • Cognex (CGNX) guided Q2 revenue @ $165mm-$170mm vs consensus @ $171.8mm.

 

Bonds

  • 10-Year Treasury Rates, are encountering serious resistance @ 2.31% level, which was once a double bottom. There is support @ 2.17%.
  • 10-Yr Note has made a new 5-day high and attempting to break resistance of bearish channel.

 

Currencies

  • The US Dollar Index ($DXY) has been consolidating over the past 7 trading sessions. A decisive break below 98.70 would be quite bearish as this is a key support level. Otherwise next level is @ 96.91.

 

Commodities

  • Things are getting very interesting in the Crude Oil market. The price of the June-2017 WTI Crude Oil futures contract made another new low and it looks like it could be heading to test support @ $47. Let’s
  • The June-2017 Gold contract bounced off the lower range or support trend line for its intermediate bullish channel. Of course, the short-term trend is bearish, but any dovish comments coming from the conclusion of the current FOMC meeting could change this in a hurry.
  • Copper (HG-July-2017) is now attempting to consolidate the gains from yesterday’s price trend breakout. China’s Caixin Manufacturing Purchasing Mgrs Index hitting a 7-month low is fundamental contributor and offsetting the threat of strike @ Freeport McMoran’s (FCX) Grasberg mine in Indonesia.

 

Real Estate

  • The potential for a bullish reversal in the DJ Real Estate Index is still in play. Patience. The market can only hide its true intentions for so long.

 

Market Performance Summary

 

RS 1Yr Exchange Traded Fund Last Chg % Chg
     
  Equities  
94 DJ-30 Industrials (DIA) 209.13 0.21 0.10%
96 SP-500 (SPY) 238.77 0.09 0.04%
100 Nasdaq-100 (QQQ) 137.43 0.23 0.17%
92 Russell-2k (IWM) 139.15 -0.71 -0.51%
100 EAFE (EFA) 64.39 0.33 0.52%
99 Emerging Mkts (EEM) 40.58 0.29 0.72%
100 Europe FTSE (VGK) 54.26 0.47 0.87%
89 Latin America 40 (ILF) 32.00 0.41 1.30%
84 Brazil (EWZ) 38.31 0.84 2.24%
98 Japan (EWJ) 52.22 0.16 0.31%
99 Pacific Ex-Japan (EPP) 45.22 0.01 0.02%
84 FTSE China 25 (FXI) 38.47 -0.13 -0.34%
0 VIX Short-Term Futures (VXX) 14.46 0.01 0.07%
     
  Major Equity Sectors  
97 Consumer Discretionary (XLY) 90.28 0.10 0.11%
76 Consumer Staples (XLP) 54.60 -0.37 -0.67%
25 Energy (XLE) 67.31 -0.34 -0.50%
74 Financials (XLF) 23.65 -0.03 -0.13%
92 Healthcare (XLV) 75.88 0.21 0.28%
95 Industrials (XLI) 66.46 0.32 0.48%
93 Materials (XLB) 53.19 0.09 0.17%
49 Real Estate (XLRE) 31.86 0.01 0.03%
100 Technology / Info (VGT) 140.32 0.28 0.20%
64 Telecom (IYZ) 34.03 0.17 0.50%
80 Utilities (XLU) 51.45 0.06 0.12%
     
  Bonds & Fixed Income  
19 20+ Yr Treasury (TLT) 121.70 0.62 0.51%
29 Aggregate Bond Fund (AGG) 108.88 0.15 0.14%
52 Treasury Inflation Protection (TIP) 114.34 0.00 0.00%
35 Investop Corp Bond (LQD) 118.65 0.35 0.30%
91 High Yield Corp Bond (HYG) 87.82 0.03 0.03%
35 Pimco Intermed Muni Bonds (MUNI) 53.04 -0.03 -0.06%
57 High Yield Muni (HYD) 30.65 0.07 0.23%
     
  Currencies  
55 US Dollar Bullish (UUP) 25.55 -0.04 -0.16%
43 Euro Trust (FXE) 105.85 0.28 0.27%
30 Japanese Yen Trust (FXY) 85.93 -0.21 -0.24%
     
  Commodities  
38 DB Commodity Index (DBC) 14.67 -0.16 -1.08%
52 Gold (GLD) 119.65 -0.02 -0.02%
21 US Oil (USO) 9.92 -0.23 -2.27%
     
  Real Estate  
52 DJ Real Estate (IYR) 79.21 -0.20 -0.25%
91 DJ Home Construction (ITB) 32.06 -0.25 -0.77%
47 Residential Real Estate Index (REZ) 63.28 -0.32 -0.50%

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