SUMMARY:
- Stocks rebound late on Fed omission, but can only close flat.
- Factory orders surprise upside.
- Layoffs fall to 5 year low.
- Fed hikes 25BP, ready to continue at a 'measured pace,' and inflation is, by the way, still contained.
- SP500 still below neckline resistance while NASDAQ looks ready to continue its downtrend.
- Fed says it remains data driven and now market looks to the Friday jobs report.
Stocks sell post-Fed, rebound late on omitted language.
The major indices were basically flat heading into the FOMC announcement with the usual obligatory bump higher into the number as shorts covered at the last minute. When the results were released the Fed raised by 25BP, kept in the 'measured pace' language, but left out a statement that energy costs were pushing through to the consumer and a statement that longer term inflation expectations were well contained. The omissions indicated a slightly more hawkish Fed not to mention the holdover of the 'measured pace' language; the latter means that there will certainly be another 25 BP hike. No 50 BP, but no end of the hiker either.
The omissions brought in sell programs and the market got dragged around the next hour and forty minutes. Then the Fed issued a mea culpa at 3:55ET, saying it inadvertently left out the 'longer term inflation expectations remain well-contained' language and stuck it back in. Stocks shot higher in the last 5 minutes, managing to close basically flat.
Will it make much difference for Wednesday? That language alone does not change the landscape. In other words nothing really changed except the Fed may be a bit more hawkish because it omitted other language regarding the pass through of energy costs. With that omission the net is a bit more hawkish outlook. With that, the market's stance has not changed.
That left SP500 below resistance at the neckline of its head and shoulders base and NASDAQ still in its downtrend, hugging the 10 day EMA after an intraday spike to test the 18 day EMA. NASDAQ has the look of an index still in a serious downtrend with this game of footsy at the short term moving averages. It did not get much better elsewhere either, with the SP600 showing a doji at the 10 day EMA and closing just below the 200 day SMA.
Volume was up as stocks traded light into the number and then the program trades hit after the result, driving volume higher by the close. Stocks basically ran in place on some higher volume, the definition of churning, but you cannot put too much into that given all of the external influences. Perhaps the late bump is indicative of a rebound Wednesday. As noted, however, the net from the Fed is a bit more hawkish stance, and that is not good for equities, particularly those expecting the Fed to back off some in the near future. It could still just have two more 25 BP hikes and then stop, but that does not change the outlook for tomorrow. |
