Courtesy of Blain.
While no one expected movement out of the Federal Reserve, there is still usually some extra volatility post statement but it was quite limited today. The S&P 500 fell 0.12% while Apple’s (AAPL) jump helped lift the NASDAQ to a 0.58% gain – Apple is a massive component in the index. The Fed continues to be in “Goldilocks” mode – sanguine on the economy but certainly not enough to raise rates. And with the election coming up they won’t do it until December if at all this year; a far cry from the “4 rate hikes!” everyone was yelling as we entered 2016. (We were not yelling that).
As expected, the Federal Reserve kept interest rates unchanged in its statement released in the afternoon. Policymakers noted the labor market has “strengthened” and that “near-term risks to the economic outlook have diminished.” “I didn’t get the feeling it was dovish or hawkish. It was kind of neutral, really,” said John Caruso, senior market strategist at RJO Futures. “It seemed like they upgraded the economy but they didn’t say they were ready to move forward on raising interest rates.” According to CME Group’s FedWatch tool, the market sees an 18% probability of a September rate hike, compared with a 30% probability before the statement.
The Bank of Japan is set to begin a two-day meeting on Thursday. Overnight, Japanese Prime Minister Shinzo Abe said his government would compile a stimulus package of more than $265 billion to reflate the flagging economy. So this is about year 20 of the government and central bank of Japan trying to stimulate the economy. It’s starting to sound familiar – we are on year 8.
We mentioned yesterday that the NASDAQ finally peeked its head over this important trendline connecting highs of the past year and today it busted through some more. The S&P 500 is still in a base building pattern that has been quite extensive at this point!
The NYSE McClellan Oscillator is back in the red here so something to watch if it continues as a precursor to broader market weakness.
We mentioned if oil fell through $44 – a level it was holding during this downturn it could start to get ugly and…. it’s starting to get ugly.
Apple (AAPL) broke over its 200 day moving average intraday but closed EXACTLY on it at the close. It had been in a bit of dire straights technically as it broke this purple trendline but now that goes out the window.
Yesterday Apple was the star in after hours, today it is Facebook (FB) up about 7%. This puts it as the 4th most valuable company in U.S. indexes behind Apple, Alphabet, and Microsoft! Tech titans here we go again. Boring old ExxonMobil is now 5th. Amazon is right behind at 6th. So put Facebook in the category of company everyone said was way too expensive to buy when it came public and now we all kick our own butts for saying that. Just amazing that about 2 years ago people were worried that they were not going to be able to capture the mobile ad market; it is now 84% (!!!) of their ad revenue.
Facebook posted quarterly earnings and revenue that blew away analyst estimates on Wednesday, easily crushing Wall Street’s predictions for its ad business. The social media behemoth posted earnings of 97 cents per share, adjusted, on revenues of $6.44 billion in revenue in the second fiscal quarter. Analysts had expected 82 cents per share on revenues of $6.02 billion. Facebook’s main money stream, ad revenue, hit $6.24 billion, versus the $5.8 billion expected by analysts surveyed by StreetAccount. Mobile ad revenue took the lion’s share (84 percent) at $5.24 billion, versus the $4.84 billion expected. That means mobile ad revenue is up 81% year-over-year. Facebook’s average price per ad increased 9% in the quarter. Messenger, Facebook’s stand-alone app, now commands a monthly audience of 1 billion mobile users, the company announced last week. That’s compared to the more than 1.71 billion users on its flagship platform.
“One out of every five mobile dollars is going to Facebook every day,” said Eric Franchi, co-founder of digital advertising company Undertone. “Facebook and Google are taking 75 to 85% of every digital advertising dollar.”
Coco Cola (KO) closed 3.3% lower after missing on revenue and cutting organic revenue forecasts for the year. The beverage maker noted more severe international headwinds than anticipated, and a worsening macroeconomic environment in the quarter. The firm did see a 3 percent rise in organic revenue, helped by better pricing.
Twitter (TWTR) had been on a very nice run technically but in the short run news dominates technicals so the social media company’s disappointing earnings report late Tuesday killed this rally.
Biotechs are looking interesting; here is the ETF. You can see after a major selloff the sector has been very range bound with 2 major failed breakouts. This is breakout number 3 and the first push over the 200 day moving average in 2016. A close above the old highs of 2016 near $290 would be a second positive sign for the sector.
