The Guessing Game Is Over…For Now

Ulli Market Commentary Contact

Thur pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

The Fed announced today that it is too soon to raise interest rates and that it will continue to keep its benchmark interest rate between 0% to 0.25%, despite a continuously improving labor market. The Fed could still raise rates when they meet again in October, but analysts speculate that if a hike were to happen it would likely be in December or Q1 of 2016.

How did today’s decision impact the stock market? Well, it is somewhat hard to tell. Markets have been performing consistently well this week ahead of the decision, however, today both the S&P 500 and Dow dropped slightly, while the Nasdaq gained. Obviously, the lack of clarity on interest rates will send markets back into the “will they or won’t they” mode that has produced much of the volatility we’ve observed throughout 2015.

Crude closed down 25 cents at $46.90 a barrel after surging 5.7% yesterday. The good news for consumers perhaps is that, according to OPEC sources, OPEC forecasts oil prices will allegedly grow by no more than $5 per barrel a year to reach $80 by 2020.

Our 10 ETFs in the Spotlight ended up mixed today with 5 of them gaining and 5 of them losing. On the winning side, Healthcare (XLV) took top billing with +0.91%, while the loser of the day turned out to be the Financials (IYF) with -1.04%.

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Stocks Rally Ahead Of Thursday Fed Decision

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks rallied Wednesday afternoon with the Dow gaining 140 points on the day, after the Federal Reserve kicked off its long-awaited 2-day policy meeting on interest rates. In one of the most important Fed meetings in recent times, economists and analysts alike are divided on whether the Fed will move forward to raise interest rates.

A quarter of a percentage point boost in the fed funds rate likely would marginally push up borrowing costs for consumers and businesses, including mortgages, car loans and corporate bonds, tempering such borrowing and, as a result, economic activity. However, some economists say it’s time to start gradually raising rates for the first time in nearly a decade given that the U.S. job market has allegedly more or less recovered. Others argue rates should remain on hold amid global stock market turmoil and China’s slowdown, among other factors. Which side will win out? We’ll find out tomorrow.

On the earnings front, FedEx (FDX) reported quarterly profit of $2.42 per share, which was 4 cents below estimates, with revenue matching forecasts. CEO Fred Smith said the company is doing well considering weaker than expected global economic conditions. Separately, FedEx will increase rates by 4.9% at its FedEx Express service, which will take effect on Jan.4. The stock closed down 2.84%. Also, Oracle (ORCL) gained slightly today after the company beat analysts’ earnings forecasts but posted disappointing revenue numbers in its first fiscal quarter earnings report. The main problem, it seems, is that software license sales are falling as the tech world shifts to Web-delivered cloud products.

All of our 10 ETFs in the Spotlight stayed with this week’s upward momentum and closed higher. The winner of the day was the Mid-Cap Value ETF (IWS) with +1.24%, while the laggard was Healthcare with +0.28%.

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Markets Shine Before Fed Meeting

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

U.S. indexes all gained over 1.10%, just a day ahead of the start to a crucial Federal Reserve policy meeting. Fed policymakers will convene Wednesday and Thursday to decide whether or not to raise interest rates for the first time in close to a decade. Industrial stocks led the pack of gainers today with energy trailing not too far behind.

Would a rate hike push us deeper into the bear market? Not necessarily. In the past six rate-hike cycles dating back to 1983, the S&P 500 stock index declined on the day of the Fed’s first rate increase three times, or 50% of the time. In contrast, stocks jumped 2.3% after the first rate hike in January 1987 and 1.6% following the initial increase in June 1999. The cause for alarm this time around is simply the fact the Fed hasn’t hiked rates in nearly a decade and has kept short-term rates near 0% for so long that investors and markets have become addicted to so-called cheap money. As we all know, a sell-off is a possibility, but the indexes can bounce back just as quickly. We will not get impulsive and let this week play itself out as it may; only after our Domestic TTI signals a new “Buy” will we re-establish new equity positions.

In tech news, we heard a report today from Hewlett-Packard (HP) that the company intends to let go 25,000-30,000 (about 10%) of the company’s total workforce of 302,000 employees, as part of a planned spinoff that will reportedly save the company $2 billion annually. Meg Whitman, H-P CEO, will become CEO of the spinoff Hewlett Packard Enterprise, a company focused on software and services for corporate clients, rather than just printers and PCs. It will trade under the ticker symbol HPE.

All of our 10 ETFs in the Spotlight joined the pre-Fed announcement party and rallied. Leading the pack were the Financials (IYF) with +1.49%; lagging behind was the Low Volatility ETF (SPLV) with +0.83%.

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Wall Street Remains Hesitant Pending Fed Meeting; Stripe Making Headway For Mobile Payments

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving the Markets

Stocks slipped a tad as nervous investors looked ahead to a crucial Federal Reserve decision on whether to raise interest rates. Nine of the ten S&P sectors closed lower today, with the materials and energy sectors leading the decliners. You can probably guess who the lone gainer was: Utilities. Utility stocks have remained a solid go-to play for bearish investors over the past year and continue to do so. Overall, traders remain focused on Thursday’s Fed meeting, where board members have the option of raising interest rates for the first time since 2008 or holding off but signaling their intention to tighten access to credit.

What could delay the rate hike? China. Experts are placing their bets that that the Fed will likely hold off on raising rates at the upcoming meeting due to concerns about China’s economic slowdown. Still, they expect the Fed to push rates higher over the next few years, which could greatly benefit the banking industry—especially lenders that are heavily invested in short-term and variable-rate loans.

In tech today, San Francisco startup, Stipe, announced a ‘revolutionary’ technology that will facilitate the buying and selling of products online. The company unveiled a new set of tools today that will provide businesses the capability to sell products inside mobile apps, rather than redirecting them to a 3rd party website. Stripe says it is trying to fix a major issue in the mobile consumer space, given that mobile devices account for 60% of browsing traffic for shopping sites but only 15% of purchases. Stripe is just one of a growing number of digital payments companies—among them is Twitter co-founder Jack Dorsey’s Square which is poised for an initial public offering by year’s end. But Stripe has nonetheless developed quite a following in the world of tech and finance. It has raised about $300 million and private investors value the company at $5 billion.

All of our 10 ETFs in the Spotlight slumped as the indexes meandered without clear direction. Consumer Discretionaries (XLY) led the downside with -0.53% and the Dividend ETF (DVY) held up best by giving back only -0.28%.

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ETFs/Mutual Funds On The Cutline – Updated Through 09/11/2015

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 383 ETFs, of which currently 24 (last week 11) 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.

These ETFs are generated from my selected list of some 97 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. 8 ETFs (last week 3) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 32 (last week 30) above the line and 768 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 US Equity Markets See Further Drops In The Short Term?

Ulli Market Review Contact

ManThe stock markets in the US clearly show elevated volatility as the swings have now extended into the third week, said Jonathan Corpina of Meridian Equity Partners. One of the most important things that investors need to learn is to live with is the heightened uncertainty and volatility because this is the “new normal.”

Economic growth has not been very strong in the US and internationally, earnings growth has been tepid as well so far this year. Moreover, the jury is still out about a possible rate hike by the US Fed next week and investors do need to get used to the uncertainty. That said, there’s still room for a pullback as investors are reluctant to put money back amid the continuing volatility in the market, he said.

Amid the raging speculation about a possible rate hike, Wilmington Trust has maintained its exposure in stocks, said Luke Tilney. The current heightened volatility has also been caused by uncertainty about growth in China’s economy to the degree that those uncertainties have been factored in over the past few weeks in stock pricings but Wilmington believes risky assets are the place to be, he added.

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