Market Snapshot
briefing.com
| Dow | 30668.53 | +303.70 | (1.00%) | | Nasdaq | 11099.15 | +270.81 | (2.50%) | | SP 500 | 3789.99 | +54.51 | (1.46%) | | 10-yr Note |
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| | NYSE | Adv 2398 | Dec 877 | Vol 1.3 bln | | Nasdaq | Adv 3387 | Dec 1306 | Vol 5.3 bln |
Industry Watch
| Strong: Communication Services, Financials, Consumer Discretionary, Information Technology, Real Estate, Industrials |
| | Weak: Energy |
Moving the Market
-- FOMC raises target range for fed funds rate by 75 basis points; sees additional increases
-- Drop in Treasury yields
-- Relative strength from the mega caps
-- ECB holds emergency meeting to address bond fragmentation issues
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Closing Stock Market Summary
15-Jun-22 16:25 ET
Dow +303.70 at 30668.53, Nasdaq +270.81 at 11099.15, S&P +54.51 at 3789.99
[BRIEFING.COM] The major indices enjoyed a rebound today, but that wasn't asking much of the market. Entering today, the S&P 500 was down 10.4% from its intraday high last Monday and the Nasdaq Composite was down 11.6%. To say that the market was oversold on a short-term basis was not an overstatement.
The magnitude, and speed, of those losses left it ripe for a rebound try, and it garnered support from a concurrent rebound in the Treasury market and an FOMC decision that went mostly as (recently) expected.
Briefly, the FOMC voted to raise the target range for the fed funds rate by 75 basis points to 1.50-1.75% and said it anticipates additional rate hikes will be appropriate. That vote was not unanimous, however. Kansas City Fed President George dissented, preferring a rate hike of only 50 basis points at this meeting.
The accompanying summary of economic projections revealed upward revisions to the median estimate for PCE inflation (to 5.2% from 4.3%) and core CPE inflation (to 4.3% from 4.1%) this year, a downward revision to the change in real GDP (to 1.7% from 2.8%), a higher unemployment rate (to 3.7% from 3.5%), and, most importantly, a sharp upward revision to the median estimate for the fed funds rate (to 3.4% from 1.9%).
The range of projections for the 2022 fed funds rate (3.1-3.9%) was more in-line with what the fed funds futures market has priced in; hence, there weren't any major surprises in the Fed's revised interest rate projections.
That understanding was a bit of a calming influence that enabled the market to stand its higher ground during Fed Chair Powell's press conference, which featured a declaration from the Fed Chair that he does not expect 75-basis point rate hikes to become common, and an allowance that the July meeting is likely to feature either a 50-basis point rate hike or a 75-basis point rate hike.
By the closing bell, however, the S&P 500 was little changed from the level it was trading at just before the 2:00 p.m. ET release of the policy directive. What that suggested to us is that today's gains were driven more by rebound-minded action following the large losses than they were by any genuine excitement over what the FOMC and Fed Chair Powell communicated today.
To be fair, the 2-yr note yield and 10-yr note yield moved lower following the Fed's communications. Treasuries were already rallying from their own short-term oversold condition, but the gains were extended after the close of the Treasury market's cash session when the Fed Chair was speaking. As of this writing, the 2-yr note yield was at 3.23%, down 20 basis points from where it settled on Tuesday, whereas the 10-yr note yield was at 3.32%, down 16 basis points from where it settled on Tuesday.
That move was likely aided by some short-covering activity, but in any case it didn't corroborate a bearish takeaway from what was learned today. A mixed batch of economic data, which featured weaker-than-expected retail sales for May, and the Fed's downward revision to the change in real GDP for 2022, could be considered bond friendly.
By and large, market participants were friendly to the majority of stocks today. Advancers led decliners by a nearly 3-to-1 margin at the NYSE and the Nasdaq; 21 of 30 Dow components ended with a gain; and ten out of 11 S&P 500 sectors closed higher. The lone sector holdout was the energy sector (-2.1%), which got clipped by lower oil prices ($115.25, -3.68, -3.1%) and an admonishment of top oil companies by President Biden, who said refinery margins well above normal "at a time of war" are not acceptable.
The mega-cap stocks were the key movers. The Vanguard Mega-Cap Growth ETF (MGK) gained 2.6% versus a 1.0% gain for the Invesco S&P 500 Equal Weight ETF (RSP).
In other important central bank news today, the ECB held an emergency meeting to develop a plan that it believes will mitigate the bond fragmentation issue in the eurozone. The ECB's action prompted a rebound bid in eurozone bond and equity markets, which had also gotten into a short-term oversold condition.
Reviewing today's economic data:
- The MBA Mortgage Applications Index increased 6.6% week-over-week, with purchase applications up 8% and refinancing applications up 4%
- Total retail sales decreased 0.3% month-over-month (Briefing.com consensus +0.2%) following a downwardly revised 0.7% increase (from 0.9%) in April. Excluding autos, retail sales increased 0.5% (Briefing.com consensus +0.7%) following a downwardly revised 0.4% increase (from 0.6%) in April.
- The key takeaway from the report is that spending activity weakened in May, with high gas prices likely curtailing discretionary spending on goods. Excluding gasoline station sales, retail sales were down 0.7% month-over-month in May. This could eventually pique concerns that the Fed will be raising rates aggressively into an economic slowdown.
- The New York Fed's Empire State Manufacturing Survey for June was weaker than expected at -1.3 (Briefing.com consensus 3.0), but it was improved from the -11.6 reading in April. Nonetheless, a number below 0.0 is still indicative of a contraction in manufacturing activity.
- The Import-Export Price Index for May showed a 0.3% decline in nonfuel imports and a 2.9% increase in non-agricultural exports. That left the year-over-year changes at 5.9% and 19.3%, respectively.
- Business Inventories increased 1.2% month-over-month in April, as expected, following an upwardly revised 2.4% increase (from 2.0%) in March.
- The June NAHB Housing Market Index dipped to 67 (Briefing.com consensus 68) from 69 in May.
Looking ahead, market participants will receive the May Housing Starts and Building Permits Report (8:30 a.m. ET), the Weekly Initial Claims Report (8:30 a.m. ET), and the June Philadelphia Fed Index (8:30 a.m. ET) on Thursday.
- Dow Jones Industrial Average: -15.4% YTD
- S&P 400: -18.7% YTD
- S&P 500: -20.5% YTD
- Russell 2000: -22.9% YTD
- Nasdaq Composite: -29.1% YTD
Indices near session highs
15-Jun-22 15:30 ET
Dow +542.30 at 30907.13, Nasdaq +364.20 at 11192.54, S&P +86.77 at 3822.25
[BRIEFING.COM] The volatility had cooled-off for a moment while the indices moved sideways before another sharp upturn toward the highs of the day.
The energy sector (-1.5%) is a standout as the only S&P 500 sector trading in red heading into the close. WTI crude oil futures are trading down 1.8% to $116.76/bbl and natural gas futures are up 4.1% to $7.48/mmbtu.
Separately, Treasury yields are down to the lows of the day. The 10-yr note yield is down 12 basis points to 3.36% and the 2-yr note yield is down 23 basis points to 3.20%.
Looking ahead to Thursday, market participants will receive the following economic data:
- 8:30 ET: Housing Starts (Briefing.com consensus 1.730 mln) and Building Permits (Brieifng.com consensus 1.800 mln) for May. Weekly Initial Jobless Claims (Briefing.com consensus 215,000) and Continuing Claims. The Philadelphia Fed Index (Briefing.com consensus 5.0) for June
- 10:30 ET: Weekly EIA Natural Gas Inventories
Mega caps pull ahead
15-Jun-22 15:00 ET
Dow +264.03 at 30628.86, Nasdaq +236.72 at 11065.06, S&P +45.01 at 3780.49
[BRIEFING.COM] The market's recent whipsaw action led all the major indices on a sharp incline to new session highs. The indices have since come off those levels but remain well above session lows.
As the volatility increases, the mega cap upside leadership has become even more pertinent to market action. The Invesco S&P 500 Equal Weight ETF (RSP) is up 0.6% while the Vanguard Mega Cap Growth ETF (MGK) is up 2.0%.
Most of the S&P 500 sectors have maintained their strength through the recent up-and-down action. Currently, nine of the 11 sectors trade in the green with the laggards being energy (-1.4%) and materials (-0.3%).
The single best performing sector, consumer discretionary (+2.7%), has seen similar price action to the broader market with a sharp incline to a new session high but continued volatility. Two sector standouts are mega cap components Amazon.com (AMZN 107.12, +4.98, +5.1%) and Tesla (TSLA 693.50, +30.76, +4.6%).
FOMC votes to raise rates by 75 basis points to a range of 1.50-1.75%
15-Jun-22 14:25 ET
Dow +153.17 at 30518.00, Nasdaq +193.15 at 11021.49, S&P +36.20 at 3771.68
[BRIEFING.COM] The major averages jostled around in the last half hour; notably, the Dow Jones Industrial Average (+0.50%) went negative for a moment but has since recovered following the release of the FOMC's rate decision wherein the Fed voted to raise the target range for the federal funds rate to 1-1/2 to 1-3/4 percent and anticipates that ongoing increases in the target range will be appropriate.
In addition, the Committee stated it would continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective.
Also, the Fed released updated projections from its June meeting; the Committee increased its 2022 PCE median inflation forecast to 5.2% from 4.3%, now sees the 2022 Fed rates between 3.1-3.6% from 1.6-2.4% prior projection, and forecasts the 2023 Fed rates between 3.6-4.1% from 2.4-3.1% prior projection.
We'd also draw attention to the bond market where yields across the curve remained lower following the rate decision, the yield on the benchmark 10-yr note still down about 5 bps to 3.433%. The dollar is now modestly higher, up +0.1% to $105.66.
Looking ahead, Fed Chair Powell is expected to start speaking at 2:30 p.m. ET.
Gold slightly higher ahead of FOMC rate decision
15-Jun-22 13:55 ET
Dow +106.48 at 30471.31, Nasdaq +160.01 at 10988.35, S&P +27.30 at 3762.78
[BRIEFING.COM] The broader market takes a modest move lower into the Fed's rate decision at the top of the hour; the tech-heavy Nasdaq Composite (+1.48%) still holds a commanding lead over its counterparts.
Gold futures settled $6.10 higher (+0.3%) to $1,819.60/oz as the market waits for the Fed's rate decision.
Meanwhile, the U.S. Dollar Index is down about -0.1% to $105.42.
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