Chances of March Hike on the Rise!
Yesterday, stocks on Wall Street suffered what’s become a rare selloff, as investors awaited Trump’s first address before the Joint Sessions of Congress that took place yesterday after closing. The scent of fleeing risk wafted through the air after Monday’s rally to new highs, one of the most pronounced and enduring rallies the market has ever seen. The gains were concentrated in defensive sectors, most specifically in utility stocks (XLU). Towards the end of closing yesterday, stocks saw additional pressure, March Fed funds futures prices seeing an uptick after the speeches of three top Fed bankers.
In summary for the day, the Dow Jones shed 0.1% and cut its 12-day winning streak. The S&P 500 fell 0.3%, the Russell 2000 (IWM) toppling 1.5%. Gold (GLD) fell 0.4%, crude recording a similar drop. That notwithstanding – and despite the losses on the last day of the month – February proved itself a very positive month for all 3 large Wall Street indexes, with the S&P 500 recording gains of 3.7%.
One of the stocks standing out was the #2 U.S. retailer, Target (TGT), which fell 12.2% after releasing a weaker than expected earnings report for Q4 2016, likewise releasing weak guidance, the chain blaming the ongoing trend towards online retailers.
And now, back to the Fed! The chances of a March rate hike are now being priced in at 72%. All of this is after the rhetoric from a number of top bankers, Philadelphia Fed’s President Patrick Harker, reiterating what he said on Feb. 15th, i.e. that not only is the economy becoming more robust but that it’s only appropriate to hike rates 0.75% this year. What he had to say was strengthened by the words of San Francisco’s Fed President, John Williams, who said that he expects a March hike to receive “serious consideration” in the coming FOMC meeting, while also noting its necessity to prevent the economy from getting “too hot.” He added that rates are now exceptionally low. Lastly, the president of the Federal Reserve Bank of N.Y., Bill Dudley, said in an interview to CNN that the rationale for additional monetary tightening is becoming more and more persuasive.
Stocks have not yet fully responded to headlines made yesterday by the Fed. In the past, statements the likes of yesterday’s had shaken traders to the core. These days, though, players’ attention is no longer on hanging on to the Fed’s every word but rather Trump’s, especially what he’s got up his sleeve vis a vis cutting regulation, taxes and infrastructure spending.
And with all of that said, far be it from us to forget that the bloated U.S. federal debt is now at $20 trillion, and when considering firms’ moderate earnings growth, a more aggressive rate hike pace from the Fed won’t only put pressure on the administration to widen the federal deficit, but will also call into question current stock valuations.
On the S&P 500, 51 stocks rose to new 52-week highs, 4 dipping to new yearly lows; on the NASDAQ, 106 stocks recorded new 52-week highs, 52 falling to new yearly lows.
About 7.9 billion shares changed hands on U.S. exchanges, pretty much on par with the average over the last 20 trading days.
Wednesday: Today’s economic figures will include the critical Supply Managers’ ISM manufacturing sector index at 10:00 N.Y. time and Markit’s manufacturing index at 9:45. Also on the roster, infrastructure spending will be released at 10:00, with weekly crude inventories coming out at 10:30. The Fed Beige Book will be released at 14:00. Monthly automobile sales figures are expected to be released today as well.
Earnings reports are expected today from Best Buy (BBY), Lowe’s (LOW), Dollar Tree (DLTR), Mylan (MYL), and Crocs (CROX) before opening. After closing, be primed for the numbers of AVGO, PLNT, and SHAK.
By: Shlomo Cooper, Senior Analyst at Tradenet
Wednesday’s Hot Stocks: PANW, CRM, TIME, ETSY, DLTR, BBY, LOW, MYL
Have a great trading day!
|Monday||10:00||Pending Home Sales||0.9%||Medium|
|Tuesday||8:30||GDP – Second Estimate||2.1%||High|
|Wednesday||14:00||Fed’s Beige Book||High|
|AMT||American Tower Corporation||AM||Monday|
|PCLN||The Priceline Group Inc.||PM||Monday|
|OKS||ONEOK Partners, L.P.||PM||Monday|
|PRGO||Perrigo Company plc||PM||Monday|
|SBAC||SBA Communications Corporation||PM||Monday|
|CNP||CenterPoint Energy, Inc.||AM||Tuesday|
|LNG||Cheniere Energy, Inc.||AM||Tuesday|
|BMO||Bank of Montreal||AM||Tuesday|
|PANW||Palo Alto Networks, Inc.||PM||Tuesday|
|ROST||Ross Stores, Inc.||PM||Tuesday|
|BBY||Best Buy Co., Inc.||AM||Wednesday|
|DLTR||Dollar Tree, Inc.||AM||Wednesday|
|LOW||Lowe’s Companies, Inc.||AM||Wednesday|
|MNST||Monster Beverage Corporation||PM||Wednesday|
|KR||The Kroger Co.||AM||Thursday|
|CNQ||Canadian Natural Resources Limited||AM||Thursday|
|COST||Costco Wholesale Corporation||PM||Thursday|
Today’s Picks – Day Trading!
New York Strategy Swing
Today’s Picks – Swing “New-York Strategy
No.1 – VOYA
|Company Name||Voya Financial|
|Sector||Financial | Asset Management|
No.2 – LVS
|Company Name||Las Vegas Sands|
|Sector||Services | Resorts & Casinos|