Morning Brief
Headline News:
The S&P 500 futures are up 23 points and are trading 0.5% above fair value, the Nasdaq 100 futures are up 103 points and are trading 0.7% above fair value, and the Dow Jones Industrial Average futures are up 63 points and are trading 0.2% above fair value.
The market is poised to win back some of yesterday’s FOMC-induced declines. Pre-open gains in mega-cap stocks have provided support to the broader market this morning ahead of some earnings reports this afternoon.
The 10-year note yield is down another five basis points at 3.92%, providing additional support to equities. The 2-year note yield is unchanged at 4.23%.
The Bank of England followed the Fed’s move yesterday, leaving rates unchanged at 5.25%. Unlike the Fed, the vote was not unanimous, with 6 members voting in favor of holding rates steady, two voting for another 25 basis points rate hike, while one voter favored a 25 basis points cut.
In other news, China’s Caixin Manufacturing PMI remained in expansionary territory for the third month in a row while Japan’s Manufacturing PMI pointed to a continued contraction for the eighth month in a row.
(Michael Gibbs, Managing Director, Lead Portfolio Manager)
Markets:
The S&P 500 sold off sharply, moving below the key support at 4,868.41 to close lower at 4,807.57. The RSI also moved sharply lower, closing lower at 57.75. The volume was massive, with 3,263,341,824 shares traded, and 81% of it was down volume. We feel the impetus for the selling was mainly the overbought nature of the S&P 500 and the breadth indicators, and we don’t believe there is a new downtrend starting. The S&P 500 could trade lower and test support at 4,897.57, form a long base and potentially resume the uptrend.
We are currently Intermediate-term bullish and short-term bearish.
John N. Lilly III CPFA
Accredited Portfolio Management Advisor℠
Accredited Asset Management Specialist℠
Portfolio Manager, RJFS
Partner, DJWMG
Windsor Wealth Planners & Strategist
Futures trading is speculative, leveraged, and involves substantial risks. Investing always involves risk, including the loss of principal, and futures trading could present additional risk based on underlying commodities investments.
The Relative Strength Index (RSI), developed by J. Welles Wilder, is a momentum oscillator that measures the speed and changes of price movements.
.The percentage of stocks trading above a specific moving average is a breadth indicator that measures internal strength or weakness in the underlying index. The 50-day moving average is used for short-to-medium-term timeframes, while the 150-day and 200-day moving averages are used for medium-to-long-term timeframes. Signals can be derived from overbought/oversold levels, crosses above/below 50%, and bullish/bearish divergences.
The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represent approximately 8% of the total market capitalization of the Russell 3000 Index.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S stock market. Past performance may not be indicative of future results. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investors’ results will vary. Opinions expressed are those of the author John N. Lilly III, and not necessarily those of Raymond James. “There is no guarantee that these statements, opinions, or forecast provided herein will prove to be correct. “The information contained was received from sources believed to be reliable, but accuracy is not guaranteed. Investing always involves risk, and you may incur a profit or loss. No investment strategy can guarantee success. The charts and/or tables presented herein are for illustrative purposes only and should not be considered as the sole basis for your investment decision. International investing involves special risks, including currency fluctuations, different financial accounting standards, and possible political and economic volatility. Investing in emerging markets can be riskier than investing in well-established foreign markets.
This is not a recommendation to buy or sell any company’s stock mentioned above.
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Bond prices and yields are subject to change based on market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. Holding bonds to term allows redemption at par value. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall, and when interest rates fall, bond prices generally rise.
The Nasdaq 100 (^NDX) is a stock market index made up of 103 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. It is based on exchange, and it is not an index of U.S.-based companies.