Fed Downgrades US Economy; Stocks End Mixed

Ulli Uncategorized Contact

Wed pic

[Chart courtesy of MarketWatch.com]

Domestic equity markets finished the month on a mixed note following a relatively positive statement release by the Federal Reserve affirming no changes to current monetary policy and a stronger-than-expected private sector job report from ADP.

Stocks held slim gains into the afternoon when the latest policy directive from the Federal Open Market Committee sent the Nasdaq and S&P 500 to fresh highs. The two indices were unable to maintain those levels into the close as broad-based weakness pressured the major averages to their lows. The S&P500 Index finished July up 5 percent to mark its best month since January.

The Federal Reserve said that the U.S. economy is growing only modestly, a downgrade from its June assessment. The Fed expects growth will pick up in the second half of the year, but the more cautious message may be a signal that it’s not ready to slow its bond purchases soon. In a statement after a two-day policy meeting, the Fed says it will keep buying $85 billion a month in bonds to help lower long-term interest rates. It also said it plans to hold its key short-term rate at a record low near zero at least as long as the unemployment rate stays above 6.5 percent and the inflation outlook remains mild.

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7 ETF Model Portfolios You Can Use – Updated through 7/30/2013

Ulli Model ETF Portfolios Contact

After repeated attempts by the S&P 500 to conquer its 1,700 milestone marker, the markets meandered since last week’s portfolio report with the benchmark surrendering some 6 points in the process.

It appears that a new driver is needed to push the indexes to the next level. This driver may very well appear later on today depending on the outcome of the Fed’s monetary policy decision. If positive, which translates to no tapering of asset purchases later on this year, we may very well see the 1,700 level conquered after all.

If tapering remains on the agenda, then all bets are off, and we could see a pullback followed by more sideways action as we hit the doldrums of summer during the month of August.

Here’s the latest ETF Model Portfolio update:

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Mixed Earnings—Index ETFs Are Going Nowhere Fast

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

U.S. index ETFs finished nearly unchanged, while the Nasdaq was able to post a modest gain as traders again appeared guarded ahead of tomorrow’s monetary policy decision from the Federal Reserve.

A rebound in Japanese equities, along with some favorable global earnings reports, a more than five-year high in German consumer sentiment, and another solid gain in U.S. housing prices provided early support. The S&P 500 added less than 0.1 percent after swinging between gains and losses during the trading session, while the Dow Jones Industrial Average fell 1.38 points.

Dow member Merck & Co reported 2Q earnings that topped estimates by a penny, as revenues declined 10.6% year-over-year (y/y) to $11.0 billion, below the $11.2 billion that the Street had anticipated. Elsewhere, fellow Dow component Pfizer reported 2Q profits also one cent north of expectations, with revenues decreasing 7% y/y to $13.0 billion, roughly inline with analysts’ forecasts. Meanwhile, Herbalife achieved 2Q EPS well above what analysts were anticipating, as revenues rose 18.1% y/y to $1.2 billion.

Although stocks endured some intraday weakness, the Nasdaq never fell into the red. The relative strength of biotechnology combined with the outperformance of technology helped the index settle in the green.

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Fed Back In Headlines As Investors Stay Cautious

Ulli Market Commentary Contact

Mond pic

[Chart courtesy of MarketWatch.com]

The major U.S. equity index ETFs finished modestly lower, pulling back before this week’s Federal Reserve meeting that could signal when the Fed is going to begin reducing its bond purchases aimed at helping the economic recovery. Key upcoming events kept traders at bay, with Wednesday’s Fed policy decision and Friday’s U.S. nonfarm payroll report looming on the horizon. Stocks began the session in the red after the third consecutive decline in Japan’s equities contributed to the cautious sentiment.

Stocks in Asia finished mostly lower to begin the week amid Chinese economic concerns and a sharp sell-off in the Japanese markets. The Nikkei 225 Index fell on broad-based weakness, led by export-related issues in the wake of a gain in the Japanese yen, which hit a one-month high versus the U.S. dollar.

Moreover, stocks came under pressure following a report that showed Japan’s retail sales unexpectedly declined m/m in June. Additionally, a report showed growth in China’s industrial profits slowed in June. Meanwhile, deterioration in South Korea’s manufacturing sector sentiment pressured the Kospi Index.

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ETFs/Mutual Funds On The Cutline – Updated Through 7/26/2013

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 398 ETFs, of which currently 307 (last week 309) 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 93 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. 58 ETFs (last week 57) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 664 (last week 803) above the line and 195 below it out of the 859 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.

One Man’s Opinion: Will Draghi Announce Any Stimulus In Next Week’s ECB Meeting?

Ulli Market Review Contact

92835431The bond yields of Spain and Italy have come down drastically and both are well below 5 percent now, a very stable level that can tide those countries over as they continue to try to raise money at reasonable rates, observed Kathleen Brooks of Forex.com.

Regarding the euro, Draghi has been incredibly clever with what he has done. They don’t like the euro falling too low, so when it was slipped close to $1.20 this time a year ago, he “talked” and that kind of helped prop up the euro. Again back in February when it was at $1.37 and was too strong for the European Central Bank, he successfully talked it down and now the euro is in a kind of equilibrium at $1.32, she noted.

Asked if she agreed with other analysts that Draghi has not been successful in reviving the credit channels and transmission mechanisms that could boost commercial and consumer lending, Kathleen said lending data out from the ECB this week showed consumer lending increased in the second quarter. But it is business lending that is mired in a depression, particularly in the periphery and that has been a big worry. Draghi can’t just use his rhetoric to improve that because that’s a structural issue and it’s going to take a long time because countries like Spain got into a debt problem and it’s going to take some time, Kathleen observed.

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