Picks of the Day July 13,2017

Fed Gets Credit for New Highs!

The Dow Jones soared to new historic highs on Wednesday, after the Fed signaled that it would further a policy of gradual monetary tightening and incrementally lower its huge balance sheet. Investors applauded the tone voiced by Fed Chair, Janet Yellen, which eased some of the concern about the weak inflation figures that were recently released. Yellen said just what the market hoped to hear leaving investors delighted!

The real estate sector (ITB), one of the sectors sensitive to interest rates, was among the strongest sectors yesterday with gains of 1.3%, its sharpest daily percentage gains in 4 months. Tech stocks (XLK) also saw sharp gains, ending up 1.3% on the day.

Daily Summary: The Dow Jones rose 0.57%, achieving a new intraday high and closing at the level of 21,532.14 points. The S&P 500 soared 0.73%, the NASDAQ taking off 1.1%.

The airline index (JETS) recorded sharp gains of 2.3% after the #1 U.S. airline company, American Airlines (AAL) reported quarterly numbers that hit analyst forecasts. AAL ended sharply up by 4.2%. Other airline companies, DAL, UAL, ALK, SAVE, and JBLU all recorded gains of at least 1%.

On the S&P 500, 27 stocks rose to new 52-week highs, 11 dipping to new yearly lows; on the NASDAQ, 81 stocks recorded new 52-week highs, 69 falling to new yearly lows.

About 6.1 billion shares changed hands on U.S. exchanges, compared to the 6.9 billion average over the last 20 trading days.

Thursday: The bi-annual speech of Janet Yellen on Wednesday accentuated inflationary concern, which makes the PPI inflation figures to be released today and the consumer CPI inflation figures to be released tomorrow all the more important. Janet Yellen will resume her testimony today, addressing the Senate Banking Committee. Her comments on inflation, the huge Fed balance sheet and interest rates are likely to have a large impact on market movement.

Senior Fed bankers have said of late that the moderation in inflation over the last few months is apparently a passing phenomenon. At the same time, though, Yellen raised a red flag both in her prepared remarks and in yesterday’s congressional testimony.

Yellen, in her prepared remarks, noted that the Fed is being careful about inflation. She reiterated that point in yesterday’s hearing. In the Q&A session, Yellen noted that temporary factors are at play, stressing that it’s too early to gauge where things are heading seeing that the economy isn’t on track to hit an annual inflation clip of 2% over the next few years; she did say, though, that the bank is following inflation carefully.

The Fed’s annual inflation target is now notched off at 2%. The barometer for measuring inflation preferred by the Fed is the PCE index, which in May registered a 1.4% reading after having briefly levitated above 2% in the month of February. Economists expect the CPI on Friday to record gains of 0.1% for June, which would bring inflation to an annualized clip of 1.7%.

Yellen’s testimony will resume at 9:30 N.Y. time, concomitant with the opening bell on Wall Street. The Producer Price Index (PPI) will be released at 8:30, along with weekly unemployment claims. The PPI is projected to have stagnated in June.

Today’s reports features DAL, before the opening bell.

Thursday’s Hot Stocks: DAL, MNK, AON

IPOs: None

Have a great trading day!

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