The stock market finished lower following a very choppy and quiet session on Wall Street, as traders digested the minutes from the latest Fed meeting. The Dow was down 85, or 0.3%, to 27,693, the Nasdaq lost 64, or 0.6%, to 11,146, while the S&P 500 fell by 15, or 0.4%, to 3,375. Advancing issues outnumbered decliners by a 5-to-4 ratio on the NYSE, where volume remained light.
Traders said that today’s late-session dip has not changed the underlying bullish trend, but tomorrow’s session could be crucial for bulls. As one trader explained, “The major indices finished near their intraday lows today, but the Nasdaq and the S&P 500 closed just below their all-time highs, and the latter benchmarks could solidify its breakout tomorrow.”
The Fed’s meeting minutes confirmed the Central Bank’s cautious outlook, with most FOMC members agreeing that the virus will continue to weigh on the economy for the rest of the year. Despite the dovish comments, Treasury yields popped higher following the releases, together with the dollar, while risk assets suffered a hit. Investors might have been hoping for hints concerning the tools that the Fed is considering to counteract economic weakness, but the minutes did not confirm the rumors regarding yield-curve targeting and negative interest rates.
While Treasuries, currencies, and gold had a volatile session, stocks and growth-sensitive commodities barely budged, amid the Fed-induced moves. Gold fell by over 3% today, adding to its losses in the wake of the Central Bank’s announcements, and it seems that investors are confident about growth no matter the monetary stimulus. This could mean that barring a significant wave of infections in the autumn, stocks could continue to head higher even if the government stimulus “dries up” toward the end of the year.
Most of the key sectors remained stable throughout the session, although real estate stocks and materials struggled in the latter half of the day. Financials held up well thanks to the rising treasury yields, and the healthcare and utilities sectors gathered strength as the day progressed, hinting at some safe-haven buying. On a positive note, small-caps bounced back following yesterday’s troubling dip, boosting the most reliable breadth measures in the process, and that is another reason to look past today’s late-day selloff.
We are in for the busiest day of the week in terms of economic releases, with the manufacturing sector and the job market in the spotlight. The Philly Fed Index is expected to drop slightly for the second month in a row, but the consensus estimate of 21 would still point to healthy growth in the sector. New jobless claims are forecast to drop further, to 930,000, while the number of continuing claims could finally fall below 15 million. The CB Leading Index is expected to drop to 1.0%, but in light of the recent positive surprises, a much higher reading is also in the cards. Stay tuned!
“ Life is what happens when you’re busy making other plans.”
As always, have a great evening and stay tuned!!!