#MarketUpdate: Is the growing US economy going to lead to a rate hike in 2015?
Stocks are mixed today, as the growing US economy appears consistent with comments by the Federal and possibly setting up a 2015 rate hike. Dow -0.02%, S&P -0.1%, Nasdaq +0.2%, R2000 0.1%
On the economic front, quarterly GDP showed us that the economy picked up the pace in the 2nd quarter and 1st quarter revisions were adjusted from an initial negative 0.2% to +0.6%. Also, weekly jobless claims saw a slight increase (+12k, to 267k) this past week, but remained at historic lows and further confirmed a robust jobs market.
July has been a dismal month for Commodity prices, with growth in China decelerating and a strong US dollar. The Bloomberg Commodity Index is off by more than 9.5% in July, the largest monthly decline since September 2011 and falling to lowest level since March 2002.
Shares of Western Digital are soaring today (10%), following quarterly results and on pace for its best day since July 2012. Of the 139 S&P 500 companies have released earnings this week, EPS remains strong (74% beat rate), but it’s not carrying over to Revenue (50% beat rate).
Technical Take Despite the bullish push above resistances yesterday (assist Dr. Yellen), that’s history now as we’re seeing a lack of commitment to follow through in the form of buying interest at these levels. We urged caution yesterday that we’d likely see another swing lower before we can get the green light to rally and we still believe that’s what is most likely. Watch for a return of strength in the leaders and at least stabilization in the laggards for first sign of a turn. Continue to be wary of strength in energy, materials and industrials as likely short-lived, short covering rallies which would not be indicative of broader market strength.
Last session the S&P 500 Index (SPX) did close above 2100 as resistance but as we see today, traders are not ready to push higher yet. Intraday, 2095 the level of the 100 day moving average, will be looked to for support while yesterday’s close will be resistance at 2108.
The Nasdaq Composite Index is also meandering lower after its marginal close above 5100 as resistance yesterday. For today we’ll watch 5076 as support which is congruent with the 50 day moving average and yesterday’s close will be resistance at 5111. Contributing to the index’s weakness is Biotech, which for the second day in a row is the weakest of all sectors and tech, the next weakest because FB’s earnings were apparently, but unsurprisingly, not good enough after the parabolic rip into them.
Today’s chart shows the numbers for the percentage of stocks above their 50 and 10 day moving averages for the members of the Nasdaq Composite Index. Fuel for rally or just another demonstration of poor breadth?