Cold Spell Washes over Market, Rate Hike Approaching
The atmosphere on Wall Street cooled yesterday, all investors tuning in to hear about a Fed rate hike today. Future rate contracts point to a probability of 93% that Fed Chair Janet Yellen will hike rates by another 0.25% just 3 months after the last hike; if we do indeed see a hike today, that will clearly point to a faster monetary tightening pace.
In summary for the day, the Dow Jones shed 0.2%, the S&P 500 retreating 0.3% and the Russell 2000 ending off 0.5%. Gold ended lightly changed, the latest selloff continuing as the precious metal fell another 1.6%.
Crude dropped yesterday for the 7th straight day after the OPEC cartel’s monthly report showed Saudi Arabia raising its daily production rate by 263 thousand barrels, the powerhouse now back to a clip of 10 million barrels a day. Also weighing on crude market sentiment was the rhetoric of Kuwait’s oil minister, who noted that he sees a risk factor in crude falling to $45 a barrel as a result of increased oil shale production. Add to that the fact that hedge funds were recently caught napping with long positions on crude at record highs, and the stage was set for panic selling which only exacerbated the weakness. It’s no wonder that energy stocks yesterday led the losses on Wall Street, the sector’s ETF, the XLE, ending off 1.13%. Crude producer, Chevron (CVX) ended off 1.8%, making it the biggest weight on both the Dow Jones and the S&P 500.
One of the stocks that stood out in yesterday’s trading was Valeant Pharmaceuticals (VRX), which fell 10.1% after Bill Ackman’s Pershing Square hedge fund announced that it had sold the rest of its holdings of 27.2 million shares in the company, the company’s total loss on its VRX position having come to $4 billion.
Airline stocks continued falling sharply on the heels of the storm that struck North America. United Continental (UAL) plummeted 4.75%, American Airlines falling 2.74%.
The stocks of hospitals recorded steep losses, after an independent study underscored the fact that 14 million Americans stand to lose their health care by year’s end under the health care plan proposed by the Republican controlled Congress in lieu of Obamacare; HCA fell 1.5%, THC was slashed 3.3%, and CYH shed 2.2% of its value.
On the S&P 500, 39 stocks rose to new 52-week highs, 3 dipping to new yearly lows; on the NASDAQ, 107 stocks recorded new 52-week highs, 48 falling to new yearly lows.
About 6.2 billion shares changed hands on U.S. exchanges, compared to the 6.93 billion average over the last 20 trading days.
Wednesday: It could be that it won’t be the Fed hinting at a higher rate hike pace – but rather inflation figures! The Consumer Price Index (CPI) will be released today at 8:30 N.Y. time, and is likely to point to inflation heating up. February’s CPI is expected to register a slight rise of 0.1%, the core inflation index, which discounts for the effect of food and energy prices, projected to record a reading of 0.2%. That would leave inflation at an annualized rate of 2.5%, significantly above the Fed target of 2%.
Today, at 14:00, the Fed is expected to announce a 0.25% rate hike, with investors focusing more than anything on the economic forecast that will accompany the policy announcement. As of now, economists are anticipating 3 rate hikes this year, though after Friday’s strong employment report, which registered 235 thousand new hires for February, speculation is circulating that 4 rate hikes this year could be in the cards, higher than expected inflation likely to increase the chances of that materializing. On Tuesday, the Producer Price Index (PPI) was released, recording a 0.3% February uptick.
Other economic figures that will be released today include the Empire State Manufacturing Index at 8:30, retail chain sales numbers to be released at the very same hour. Business inventory numbers will be released at 10:00, along the with the NAHB contractor confidence index.
Hot Stocks: FOGO, DSW, ORCL
Have a great trading day!
|Wednesday||10:00||NAHB Housing Market Index||65||Medium|
|Wednesday||14:00||FOMC Rate Decision||0.875%||High|
|JBL||Jabil Circuit, Inc.||PM||Wednesday|
|DG||Dollar General Corporation||AM||Thursday|
|ADBE||Adobe Systems Incorporated||PM||Thursday|
|TIF||Tiffany & Co.||AM||Friday|
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