Markets Melt On ECB Results; Renminbi Now Elite; Domestic TTI Goes Negative

Ulli Market Commentary Contact

Thur pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The S&P 500 index dropped back into the red for 2015, and the Dow ended down 252 points at 17,478 today after the ECB announced fresh stimulus efforts that didn’t meet the lofty expectations of investors.

It was all about Europe today, as ECB President Mario Draghi failed to deliver on the market’s hopes for a steep interest rate cut. The failure to give the EU market the amount of stimulus it hoped for caused the euro to spike against the dollar, a development that hinders the ECB’s ability to jump-start growth and boost “dangerously” low inflation. Let us not forget that a stronger euro makes European exports more expensive and less competitive.

On to China. China’s government praised this week’s decision by the IMF to add the yuan to the world’s elite reserve currencies, saying it was recognition of the government’s decades-long effort to reform its economy. The move by the IMF on Monday comes as China is at economic and financial crossroads. Slowing growth has pushed the ruling communist party to jettison the state-led development model and to advocate for a more market-driven, less interventionist system. The yuan will join the reserve currencies on Oct. 1, 2016, bringing the total number of currencies to five, along with the Japanese yen, U.S. dollar, British pound and euro.

Wall Street on Friday is poised for the November employment report. If the U.S. economy continued to create jobs at a solid pace last month, after producing a better-than-expected 271,000 jobs in October, it will likely cement a Fed rate hike on Dec. 16, barring any shocks between now and then.

To no surprise, all of our 10 ETFs in the Spotlight slipped with the indexes and closed lower. Healthcare (XLV) took top billing with -2.19% while Consumer Staples (XLP) showed the most stability by surrendering only -0.52%.

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Stocks Sink Despite Solid Jobs Numbers

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

U.S. stocks were mixed most of the day, but then all three major benchmarks sank and finished down as news spread of a reported mass shooting in California. A standout amid the downturn was Yahoo (YHOO) as shares gained 5.8% on speculation the embattled tech icon may be acquired by an unspecified buyer.

In a midday Washington speech, Federal Reserve chair Yellen signaled that the Fed is all but certain to raise interest rates this month for the first time in nearly a decade, saying that gains in the economy and labor market have met the central bank’s goals.

Wall Street is still trying to discern if the health of the U.S. economy is vibrant enough to cope with rising rates, especially after yesterday’s reading on U.S. manufacturing in November, which contracted for the first time since the end of 2012. On the other side, in Europe, ECB chief Draghi is going the opposite direction by jawboning about another QE (Quantitative Easing) program for the region, which is surprising in that central banks usually coordinate and streamline their efforts.

Also, Wall Street also got the November reading on job creation in the private sector. The ADP report topped expectations, with private employers adding 217,000 jobs last month, which is above the 192,000 that had analysts had forecast.

Oil continues to stay at depressed prices. U.S. Crude Oil slid more than 4% to back to $40 a barrel, as inventories climbed.

In a reversal from yesterday’s session, all of our 10 ETFs in the Spotlight headed south as any follow through momentum to the upside was absent. Topping the list of losers was the Select Dividend ETF (DVY) with -1.54%. Resisting this sell-off the most were the Consumer Staples (XLP) with -0.50%.

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Markets Kick Off December In A Jolly Mood

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The all too familiar mantra pushed indexes higher with the S&P conquering the 2,100 level again. Equities rallied because economic outlook is fragile, bond yields are dropping, US manufacturing is extremely weak and suddenly the odds for a December rate hike are heading south. In other words, the markets rallied in the face of poor macro data. It almost seemed as if Wall Street expects another QE announcement by the Fed and not a rate hike. Go figure…

On the other hand, maybe markets just got into the Christmas spirit as all 3 major indexes gained about 1%. Historically, December has been a profitable month for stocks. In the past 100 years, December has ranked No. 1 in performance, posting an average gain of 1.46%, although gains have downsized to 1.37% in the past 20 years, according to Cap IQ.

Investors today seemed pleased with the results of Cyber Monday, which Adobe says is stacking up to be the “largest online sales day in history.” Adobe estimates that online sales yesterday totaled roughly $2.98 billion, a 12% increase over 2014 Cyber Monday sales.

The big event this December, of course, comes on Dec. 16, when the Federal Reserve breaks from its final meeting of the year and is expected to hike interest rates for the first time in nearly a decade. Wall Street is expecting short-term rates, currently pegged near 0%, to be increased by a quarter of a percentage point.

All of our 10 ETFs in the Spotlight followed the major indexes higher as Healthcare (XLV) took the lead by gaining +1.69%. Lagging the group was the Select Dividend ETF (DVY) with +0.74%.

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Stocks Fail To Impress Post-Thanksgiving Holiday

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

U.S. stocks traded modestly lower Monday as Wall Street kicked off a big week with investors eyeing Cyber Monday sales, a key bankers meeting in Europe Thursday that could result in more stimulus efforts and the monthly U.S. jobs report on Friday.

Heading into today’s trading session, which marks the final day of November, the broad S&P 500 stock index is up just 1.5% for the year and still down about 2% from its late May record close of 2130.82.

Black Friday and Cyber Monday sales will get their fair share of coverage this week, but so will a big batch of economic data, ranging from fresh readings on housing, manufacturing, vehicle sales, and factory orders. Perhaps the most anticipated piece of data will come on Friday, when we will hear the latest jobs report.

Many analysts are saying that if the U.S. economy, which generated a much-better-than-expected 271,000 jobs in October, can deliver another strong month of job gains, it will all but cement a Fed interest rate increase at the U.S. central bank’s last meeting of the year on Dec. 15-16.

All of our 10 ETFs in the Spotlight succumbed to today’s downward momentum and closed loser. Giving back the most was Healthcare (XLV) with -1.36%; holding up the best was the Mid-Cap Value (IWS) with -0.13%.

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ETFs/Mutual Funds On The Cutline – Updated Through 11/27/2015

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 120 (last week 107) 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. 20 ETFs (last week 21) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 330 (last week 277) above the line and 470 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: Do Corporate Profits Reflect The Split In US Economic Activity?

Ulli Market Review Contact

ManThe recent stream of data indicates everything is good enough for the Fed to proceed as planned with a rate-hike in December, said Michael Gapen, Chief US Economist. Although the latest inflation report came in softer than many had expected, it was no surprise; again that was just further softness in core goods prices, being weighed down by a stronger dollar and excess capacity abroad.

There’s likely to be some concern over the strength of personal spending, which was weaker than expected. But looking closely into the sub-categories, it shows spending on utilities went down 8 percent on the month, which is about two-tenths of overall spending and accounts for most of the miss.

That’s not necessarily a bad story if consumers are spending less on utilities, it will likely show up in consumption somewhere else, just not in October. The bulk of the data flow suggests a December lift-off is likely and would get kind of the final nail in that coffin with the employment report next-week, he noted.

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