Courtesy of Blain.
Reminder: This will be the last week of nightly recaps as we move to a weekly (Sunday night) format, and roll out monthly reviews of other financial websites across the interwebs.
We will have our FIRST weekly recap/preview out Sunday evening!
After initially rallying nicely on Janet Yellen’s leaked speech, the market did an about face mid day as the Fed VP also came out with a hawkish tone, and sold off almost all those gains as the S&P 500 finished with a 0.16% loss and the NASDAQ a 0.13% gain. This is the second day of “volatility” after nearly a month of none. It is still amazing to see the market fret about a potential 0.25% rate increase, some 8 years into ‘recovery’. Sad but amazing. Yellen didn’t provide any specific timetable for a rate increase during a speech at the Kansas City Fed’s annual retreat in Jackson Hole, and Wall Street, anticipating a decidedly more hawkish posture from the Fed boss, sent shares higher after a brief, initial knee-jerk move lower.
“In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal-funds rate has strengthened in recent months,” Yellen said in a speech prepared for delivery to the Jackson Hole summit.
“The … text from Yellen’s speech at Jackson Hole today didn’t necessarily offer much in the way of surprises but it did confirm one thing, there is now a clear and public hawkish consensus building within the Fed and Chair Yellen is on board,” said Craig Erlam, senior market analyst at currencies trading platform OANDA.
Market participants said the Fed chief’s statement offered no new evidence that a rate increase is imminent, which initially bolstered market sentiment, lifting stocks. Fed Vice Chairman Stanley Fischer also asserted the case for a rate increase is gathering steam… and it could be sooner rather than later.
“I think Stanley Fischer is trying to keep the market honest and his comments regarding September being on the table and two rate hikes still a possibility are a great example of what is ‘technically true’ versus what is a likely outcome,” said Chris Zaccarelli, chief investment officer at Cornerstone Financial Partners.
Wall Street sees the chance of rate increase at the Fed’s Sept. 20-21 meeting at 36%, up from 21% on Thursday. The market sees the likelihood of a rate increase in December at 60% from 52% the day prior. The Fed in December 2015 approved a quarter-point hike, its first move in more than nine years after anchoring its rate target near zero during the financial crisis and Great Recession. However, at that meeting FOMC members indicated that four more hikes were on the way in 2016. (Long time readers will recall at the time in late 2015 we said NO WAY to 4 rate hikes in 2016 as the economy was too weak… thus far it’s been a bit fat zero hikes).
The S&P 500 hit the bottom of our wedge and bounced a bit above it.
The NYSE McClellan Oscillator has now been in the red for weeks. While it’s not an immediate sell signal it is a caution signal.
Speaking of… after breaking through it’s 10 day moving average for the first time since very early in the month, Twilio (TWLO) bounced off its 20 day moving average today. Still below it’s 10 day moving average which for the hottest momentum stocks is a sign of some weakness.
Acacia (ACIA) didn’t fall to its 20 day moving average and had a similar day as Twilio. Still below its 10 day for the 3rd day in a row.
Some of that “momentum” money seems to have moved to Chinese stocks – we mentioned Weibo (WB), the “Chinese Twitter” recently in a recap, and here is a big move by the ironically named Momo (MOMO).
Herbalife (HLF) fell following news that billionaire investor Carl Icahn has recently discussed selling his stake in the nutritional-products company to a group including Herbalife’s arch-nemesis Bill Ackman.
Ulta Salon (ULTA) was one of those rare brick & mortar retailers with a beauty of a chart in 2016… but took a hit today on earnings.
Have a good weekend and we’ll see you Sunday evening (EST).
