The Fed Blinks—Again; No Rate Hike Propels Indexes

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks rallied as the Nasdaq closed at a new record high after the Federal Reserve opted to leave interest rates unchanged but stressed that the case for a hike in rates has “strengthened”.

In its statement, the Fed said the “case for an increase in (short-term) rates has strengthened” but that the Fed “decided, for the time being, to wait for further evidence of continued progress toward its objectives” of full employment and inflation moving back up to its 2% target. The announcement to hold interest at bay came as no surprise, and the hint at a possible hike in December is in line with most analysts’ expectations.

The biggest losers after the news from the Fed today?  Bank stocks. Eight of the Ten worst performing stocks today included lender Navient (NAVI), Regions (RF) and Vank of America (BAC). Those invested in bank stocks have been hoping the fed will boost rates sooner than later, giving the banks a chance to charge more for loans before the demand for loans decreases. It looks like they will have to wait until December.

Crude oil was a big winner today. The black gold climbed $1.57 to close at $45.62 a barrel. While the daily gain is notable, the fact that oil still remains in limbo between $40-50 a barrel is giving investors a headache. Just four months ago, many thought that oil would climb over $50 a barrel and remain there after the summer. However, that never happened. Over-supply still remains the name of the game in the world of oil and it doesn’t seem that will change anytime soon.

In regards to interest hikes and the Fed crying “wolf” again, the following is a spot on demonstration of where we are at.

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Treading Water

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks inched slightly higher Tuesday ahead of Wednesday’s interest rate decision from the Federal Reserve. There is not much hype to get jittery about this time around, as most believe that there is no hike slated for this year. Also on deck for tomorrow: A rate policy announcement from the Japanese.

Shares of ExxonMobil (XOM) fell Tuesday amid a report that a federal regulator is investigating some of the U.S. energy giant’s accounting practices. The SEC is probing how the company valued its assets during the continuing plunge in global oil prices, as well as how it estimates future asset values. Apparently, there are numerous other U.S. energy companies that have written down the value of their drilling assets by about $177 billion last year. Thus, eyebrows are raised to say the least.

In the world of merchandise retail, we heard today that Kmart is going to close 64 stores across the U.S. beginning on Sept. 22. Both Sears (its parent company) and Kmart have had a difficult time remaining profitable and competitive in a retail environment increasingly dominated by other mass market chains and e-commerce sites like Amazon.

Other dreadful data included a plunge in housing starts, the biggest in 5 months, with building permits slipping for the second month in a row. But not to worry, home builder confidence is surging. Go figure…

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A Failed Rally

Ulli Market Commentary Contact

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

An early rally attempt failed with the major indexes slowly but surely retreating and ending just about unchanged. Anxiety prevailed as Wall Street awaits Wednesday’s key Federal Reserve decision on interest rates. To me, it’s a foregone conclusion that the Fed, for a variety of reasons, such as consistently weakening economic data points and obvious support for the incumbent party, will not raise rates.

Of course, the Fed could always go against expectations and hike for the first time in 2016, but I think that their memories of the last episode, when rates were raised in December of 2015—and its bearish effect on the markets—remain vividly present.

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One Man’s Opinion: Welcome To Fantasy Land

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OneMan'sOpinionBy Peter Schiff via Euro Pacific Capital

For years I have argued that ultra-low interest rates act more as an economic sedative than a stimulant. This idea has elicited laughter from the economic establishment. But it is becoming clearer that rates set by central banks that are far below the levels that free markets would have otherwise determined have dragged the world into the economic mud. The simple proof is currently arising in Europe where negative interest rates are now transforming companies from agents of growth, production, and employment into financial sloths that exist solely to borrow money.

In a September 7 front page article, the Wall Street Journal reported that as of September 5, €706 billion worth of investment-grade European corporate debt, or roughly 30% of the market, according to trading platform Tradeweb, was trading at negative yields, an increase from just 5% in January. These negative yields were the result of intense activism on the part of the European Central Bank (ECB).

For years the ECB had been trying to stimulate growth by buying trillions of euros’ worth of sovereign debt. But as these programs proved ineffective to wake up the EU economy from its long economic slumber, this year they began moving into the corporate market. Most of this buying has occurred on the secondary market, for bonds that had previously been issued at positive rates. The central bank buying raised prices of these bonds sufficiently to push yields into negative territory. It also has drawn in speculators who have bought low yielding bonds not because they are good investments but because they are convinced that the ECB will one day buy them out at a premium.

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ETFs On The Cutline – Updated Through 09/16/2016

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Below please find the latest High Volume ETF Cutline report, which shows how far above or below their respective long-term trend lines (39 week SMA) my currently tracked ETFs are positioned.

This report covers the HV ETF Master List from Thursday’s StatSheet and includes 366 High Volume ETFs ETFs, defined as those with an average daily volume of more than $5 million, of which currently 306 (last week 318) are hovering in bullish territory. The yellow line separates those ETFs that are positioned above their trend line from those that have dropped below it.

Take a look:

The HV ETF Master Cutline Report  

In case you are not familiar with some of the terminology used in the reports, please read the Glossary of Terms.

If you missed the original post about the Cutline approach, you can read it here.

ETF Tracker Newsletter For September 16, 2016

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ETF Tracker StatSheet

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https://theetfbully.com/2016/09/weekly-statsheet-for-the-etf-tracker-newsletter-updated-through-09152016/

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Market Commentary

MID-SEPTEMBER REMAINS VOLATILE

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[Chart courtesy of MarketWatch.com]

1. Moving the Markets

It has been a volatile week to say the least. The Dow Jones Industrial average ended slightly lower today to round out the week on Wall Street. Traders are once again looking ahead to next week’s Fed meeting on interest rates to see if they can decipher any meaningful info that could be utilized to secure gains.

The Dow closed up about 90 points for the week. And while the wild market swings continue (as investors gauge whether central banks will continue to support markets at levels of the past) the moves have transitioned towards the upside after last Friday’s nearly 400-point rout. While the Dow has posted three triple-digit moves this week, two of them have been of the bullish flavor. The Dow soared nearly 200 points yesterday, offsetting a nearly 260-point drop Tuesday, thus volatility remains the word moving forward.

In banking news, the U.S. Justice Department is seeking a $14 billion civil settlement with Deutsche Bank (DB) over the German financial institution’s alleged role in artificially propping up the U.S. housing market leading up to the Great Recession back in 2008. Deutsche Bank shares traded in New York plunged 8.4% to $13.50 in pre-market action Friday after the company confirmed that justice negotiators had staked out “an opening position” of $14 billion in their discussions. Ouch!

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