Courtesy of John Nyaradi.
Today’s FOMC minutes crushed index ETFs after solid gains yesterday
The Federal Reserve Building
Index ETFs have reversed yesterdays gains and more after today’s FOMC minutes sparked fear in investors. The SPDR S&P 500 ETF (NYSEARCA:SPY) lost 1.24%, the SPDR Dow Jones Industrial Average ETFs (NYSEARCA:DIA) lost .78%, the PowerShares QQQ Series 1 ETF (NASDAQ:QQQ) lost 1.54% and the iShares Russell 2000 Index ETFs (NYSEARCA:IWM) lost 1.86%.
Today’s FOMC Minutes were not pleasurable for investors, to say the least, likely because the FOMC illustrated differing perspectives on quantitative easing and suggested possible QE changes as early as March. Translation: the Fed might soon take away the punchbowl soon, and the punchbowl addicted markets and investors did not and will likely not like it. In that respect, I guess it is not too surprising that markets dropped over 1% today, as we all know the difference between a Fed QE field day and a Fed QE let down. Today qualifies as a Fed QE let down, which (hopefully) indicates that the US economy is improving. But, considering the rest of today’s news, I am not too excited. More on that in a moment.
From a technical standpoint, the S&P 500 already appeared to be over valued before today’s FOMC minute slap, with an RSI having just bounced off of the “overbought” 70 threshold and a negative MACD. Still, the S&P and the DJIA remain bullish in terms of the 50 Day and 200 Day Moving Averages, as the S&P 500 in particular is still a mere 40 points above the 50 Day Moving Average. With the possibility of a changed QE in March and the Congressional sequestration battle deadline looming on March 1st, the technical picture could change dramatically in the next few weeks.
Economic reports released today were not the best either, as January housing starts and a sluggish Producer Price Index did not help investor sentiment. FOMC Minutes Upstage Home Construction Report.
Furthermore, Greece sovereign debt default fears are resurfacing, as 100,000 people took to the streets to protest more austerity, unemployment is hovering around 27%, and the Greek GDP shrunk by 6.4% last year. European Stocks Retreat On Wednesday.
Bottom Line: Markets and investors appear to be waking up to the world around them, although, as always it seems, it is the Fed that sets off the alarm.
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