SUMMARY:
- Weak ISM, Fed comments spark a continued rally in stocks, bonds.
- Dallas Fed president Fisher very bullish re end of rate hiking campaign.
- May ISM slips toward 50 as some components fall into contraction.
- Oil slips higher ahead of next inventory report. Is the silent killer back?
- SP500 moves through 1200 but volume falls as NYSE closes early.
- Bracing for Fed damage control, higher oil impacts, and resistance.
Stocks add to gains that are already factoring in less Fed action.
Wednesday had to be one of the more interesting sessions in recent memory, and even further back than that. Pre-market the Dallas Fed president stated that the rate hiking ballgame was virtually over, and that sparked an immediate rally in bonds. Indeed, the 10 year note saw its yield plummet to 3.91%. Amazing. Stocks were a bit slower on the uptake, but when the May ISM report limped in less than expectations and nearing the breakeven point at 50 they got the message and jumped higher.
The boost pushed SP500 through 1200, and it held above that level all session until a late afternoon dip. It undercut 1200 but then managed to rebound to hold the move on the close. NASDAQ rallied to within 5 points of the key 2100 level and refused to try any higher. Small caps were once more the leaders, posting a 1.1% gain in the SP600 that pushed it past the early April highs. Breadth was strong on NYSE given the small cap leadership, so-so on NASDAQ as it was led by the large caps.
Volume was the 'conundrum' of the day. It rose significantly on NASDAQ, but NYSE saw volume actually fall. The culprit: an early close (4 minutes) on NYSE due to communications problems. Now 4 minutes seems hardly enough to matter when you are talking 1.4B shares. Consider, however, that much of the last hour volume on NYSE occurs when the big money puts in their market on close orders that are filled at the closing price. All of those trades were cancelled Wednesday, and thus a big burst of volume was not registered. Therefore volume was lower on NYSE even when it looked ready to top Tuesday volumes.
All in all a positive session with stocks and bonds rallying in sync. Volume was decent, breadth was solid, and stocks in general added to their gains with SP500 clearing 1200 on the close. The rally continues on the belief the Fed is very close to completing its rate hiking, spurred by very open and frank comments. That leaves you wondering whether the rest of the Fed is going to come out the next couple of days and try to take some of the gift back. |
