The Morning After: Bulls On Fed Hike Take A Hike

Ulli Market Commentary Contact

Thur pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Wall Street’s enthusiasm over the Federal Reserve’s interest rate hike proved short-lived as stocks sold off sharply today, led by the energy sector, after oil prices fell below $35 a barrel. Although equities rallied briefly at the opening bell and looked ready to build on a three-day winning streak, the gains quickly evaporated as broader market indexes dropped.

The major culprit was oil prices, as U.S. benchmark crude dropped more than 2% to $34.69 a barrel, the lowest since February 2009, which dragged the energy sector down with it. As I mentioned yesterday, a ban on U.S. oil export is in the midst of being lifted. And the news today was that the world’s biggest oil producers in OPEC forecasted a scant chance for a meaningful oil price rise in 2016. Extra Iranian production was expected to add to the global glut, while voluntary output cuts looked remote.

On the economic front, initial jobless claims declined last week, while continuing claims slightly increased. It will be interesting to see how the December numbers for the U.S. economy impact the sentiment of the market heading into 2016.

In a complete reversal from yesterday, all of our 10 ETFs in the Spotlight surrendered their gains and closed lower. Giving up the most was the Equal Weight S&P (RSP) with -1.69%, while the Low Volatility S&P (SPLV) held up best with -1.00%.

Read More

Rate Hike Receives Warm Winter Welcome; Oil Export Ban Lifted

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Heading into decision day for the Fed, skeptics warned that an increase in rates could cause market volatility and upheaval. Well, the exact opposite happened today as it seems that Wall Street bulls viewed the Fed’s rate hike as a sign of an improving economy. The question in my mind is as to whether this euphoric reaction represents simply a relief rally or the continuation of the bullish trend. We’ll have to be patient and give it a little time to see if upward momentum can be maintained.

The Fed delivered the news in a policy statement, which read: “Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 0.25% to 0.50%”.

Wall Street also got the forward guidance it wanted to so hear on the pace of future hikes in 2016: “The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases,” the statement read. The key word, of course, was “gradual.”

In oil news today, we heard that congress reached a deal late Tuesday on a $1.1 trillion spending bill that would end the four-decade-long ban on most U.S. exports of crude oil. Facing plunging revenue and profits, U.S. oil and gas companies have announced 250,000 layoffs this year, according to a November report by consultant Graves & Co. that was cited by Bloomberg. The fact that U.S. producers may finally be allowed to sell unrefined crude oil to foreign customers is a welcome development to the industry but hardly a boon to the bottom line.

All of our 10 ETFs in the Spotlight headed higher as the rebound continued. Consumer Staples (XLP) led with +1.93%, while the Mid-Cap Value (IWS) lagged but still gained +1.21%.

Read More

Stocks ‘Gearing Up’ For A ‘Winter Hike’

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks jumped Tuesday with the Dow gaining 157 points as the price of crude oil rallied for a second day and Wall Street awaits the Federal Reserve’s decision Wednesday on interest rate hikes.

The Federal Reserve kicked off its two-day policy meeting Tuesday, and futures are pricing in a roughly 80% chance the Fed will hike interest rates for the first time since 2006. The general consensus on Wall Street is that Yellen will reassure markets that the pace of increases in 2016 will be very slow and deliberate, a so-called dovish message that would reduce some of the angst and fallout of any rate hike. Depending on the wording, we could see more upside momentum in form of a relief rally.

Apple (AAPL) has been stealing headlines over the past two days, not because of snazzy new products, but rather that the stock has been falling hard. Shares continued to drop today and have disappointed over the last 30 days, rising just 0.2%, which is miniscule compared to other tech stocks that have been rallying. The latest concern to hit Apple shares came Monday after Morgan Stanley cut its outlook for Apple smartphone sales. Morgan Stanley now sees smartphone shipments to fall 6% in the current fiscal year.

All of our 10 ETFs in the Spotlight gained as the rebound from an oversold condition continued for a second day. Leading the pack were the Financials (IYF) with +2.16% while Consumer Discretionaries (XLY) lagged with +0.55%.

Read More

Stocks Gain Ahead Of Fed Meeting; Oil Edges Higher

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks climbed at the last minute today ahead of Wednesday’s expected Fed rate hike as oil prices found some stability and edged higher.

Oil sold on U.S. markets is priced slightly above $36 a barrel, up 1.7%, after futures slipped to below $35 a barrel earlier in the day. In recent days, the prices for oil in the U.S. and for Brent crude, from the North Sea, have hit six- and seven-year lows, respectively.

Shell (RDS) says it is cutting 2,800 jobs in a pre-planned administrative move, but that the job cuts, amounting to 3% of its workforce, have more to do with the company finalizing its takeover of British-based BG Group, not oil prices.

This week brings the equivalent of the Super Bowl for economists, with the Federal Reserve all but certain to raise interest rates for the first time in nearly a decade. Much of the drama after Wednesday’s meeting will revolve around the signals Fed policymakers send about the pace of subsequent hikes. Before it acts, however, the Fed will review a final batch of economic reports on inflation, housing and industrial production.

9 of our 10 ETFs in the Spotlight edged higher as the markets rebounded into the close. Consumer Staples (XLP) led with +1.05% while the Mid-Cap Value ETF (IWS) slipped -0.40%.

Read More

ETFs/Mutual Funds On The Cutline – Updated Through 12/11/2015

Ulli ETFs on the Cutline Contact

Below are the latest ETF Cutline reports, which show how far above or below their respective long-term trend lines (39 week SMA) my currently tracked ETFs/MFs are positioned.

The first report covers the ETF Master List from Thursday’s StatSheet and includes 381 ETFs, of which currently 36 (last week 110) are hovering in bullish territory.

The second report includes only High Volume ETFs. To clarify, High Volume (HV) ETFs are defined as those with an average daily volume of $10 million or higher. Volume figures can change in a hurry, so be sure to check first before investing.

These ETFs are generated from my selected list of some 98 that I use in my advisor practice. It cuts out the “noise,” which simply means it eliminates those ETFs that I would never buy because of their volume limitations. 10 ETFs (last week 18) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 56 (last week 293) above the line and 744 below it out of the 800 that I follow.

Take a look:

  1. ETF Master Cutline Report
  2. ETF High Volume Cutline Report
  3. MF 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.

One Man’s Opinion: Will A Sudden Jump In Wage Growth Trigger Faster Rate Hikes?

Ulli Market Review Contact

ManThe US economy is likely going to be in the backdrop of a flatter yield curve for quite some time because the Fed is going to be raising rates, but they are going to be telling the markets that their end game is probably much lower than where they thought it was, said Ellen Zentner of Morgan Stanley.

A lot of the activity that is being witnessed up to the rate hike could be the anticipation of higher rates, but rates are not going to rise that much. So, it’s unlikely higher rates would be very restrictive to economic activities overall, certainly not when the balance sheets of households are considered, very little of which is subject to a variable rate.

Morgan Stanley thinks the economy takes higher interest rates and markets very well next year, she noted.

Read More