Indexes gapped up at the open and added modestly to that opening print as oversold conditions prevailed. The S&P 500 gained 0.60% while the NASDAQ rallied 1.21%. Existing home sales increased 1.7% in April to an annual rate of 5.45 million units, according to the National Association of Realtors.
The probability of a June rate hike has jumped to 30% from around 4% at the start of the week, according to CME Group’s FedWatch site. Futures markets are predicting two rate hikes this year as opposed to just one as recently as last week.
“It looks like the market is just kind of doing the rebound from all the Fed talk this week,” said Chuck Self, CIO of iSectors.
“Stocks have been choppy since the [FOMC] minutes but a hike in and of itself isn’t likely a bad thing for stocks as long as the data supports it. But there is probably some fear of a policy error — in other words hiking too much and killing economic growth — given the anemic global growth,” said Bill Stone, chief investment strategist at PNC Asset Management Group.
“There’s still a question in the market as to whether or not the Fed will go ahead with a rate hike this summer. After all, we’ve experienced similar telegraphing from Fed officials only to have Chair Yellen rebuff their comments,” said Quincy Krosby, a market strategist at Prudential Financial.
No change from yesterday’s comments – markets are still in a downtrend until otherwise proven. We were just in a “rubber band” moment where indexes got pulled too far in 1 direction and an oversold condition is being worked off. Both indexes have some obvious downtrend lines we have marked in purple that they need to burst through to have us thinking more positively.
The NYSE McClellan Oscillator reached a rarely seen level of oversold yesterday so it was natural to expect some sort of bounce soon.
The “hawkish” Fed talk the past few days has helped the U.S. dollar rally over its 50 day moving average.
Deere (DE) posted earnings that beat on both the top and bottom line. The heavy equipment maker noted the continuing downturn in the global farm economy, as well as weakness in the construction equipment sector, but said it was helped by its flexible cost structure, among other factors. Traders were not impressed!
Foot Locker (FL) matched estimates with first-quarter profit of $1.39 per share. Revenue was slightly below analysts’ expectations, and the comparable-store sales increase of 2.9% was below consensus estimates of a 4.5% jump. The company notes that profits were at a record level, and that the company did well in dealing with rapidly shifting customer tastes. Traders were not impressed!
Ross Stores (ROST) tumbled on weak sales. Did I mention traders were not impressed? The damage in the retail sector the past month has been epic.
Gap (GPS) will close 75 of its Old Navy and Banana Republic stores in an effort to save $275 million annually. What a chart!
We did miss American Eagle (AEO) earnings beat earlier this week – a rare glimmer of positive in this sector.
Applied Materials (AMAT) soared after the maker of semiconductor manufacturing tools late Thursday said orders hit a 15-year high in its latest quarter.
Have a great weekend and again – please go to the mall if you have some time – American needs you! 😀