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Oil, Home Sales Data Ahead as Markets Recover From Attacks in Brussels

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March 23, 2016

(Wednesday Pre-Market) Stocks were relatively flat early Wednesday after the S&P 500 (SPX) broke its streak of gains yesterday in the aftermath of the terrorist attacks in Brussels. The SPX sits just below the 2050 mark, which remains a level of strong resistance.

Tuesday’s slight decline was led by travel-related stocks, which are edging higher in the pre-open, and today the U.S. warned Americans about travel to Europe after the Brussels incidents. The market, for better or for worse, largely shrugged off the terrorist attacks, though gold enjoyed its safe-haven status yesterday. Not today. Gold is giving back those gains, and was recently trading down 2%.

The SPX and the Dow are still ahead of the game for the year, but the Nasdaq Composite is down 3.7% since January. The Wall Street Journal blames the decline on the heavily weighted shares of Amazon (AMZN), which are off 19%. It notes, however, that though the index is a bulk of technology stocks, nine biotech stocks are helping to pull it down.

The dollar is also on the rise again, and that could impact commodity prices. Crude supplies soared by 8.8 million barrels for the week ended March 18, the American Petroleum Institute showed in its weekly report, sources told MarketWatch. That’s far ahead of the Platts forecast for an increase of 2.7 million barrels for crude inventories. Wednesday brings the government’s closely watched Energy Information Administration report. U.S. oil futures vacillated Tuesday amid ambiguity about oil supplies ahead of next month’s meeting among major producers, and ended down slightly at $41.45 a barrel. Given that the new front-month contract is now the May contract as of Tuesday, that settlement price was the highest front-month closing price since Dec. 1.

The government is scheduled to release new-home sales today, and expectations are for a rise of 3.2%. If that pans out, it’s a sharp turn higher after January’s 9.2% dip, not to mention starkly inconsistent with February’s existing-home sales, which showed a 7.1% decline. It also doesn’t mesh well with today’s reports on February home-loan applications, which sank 3.3%, according to the Mortgage Bankers Association.

S&P 500

FIGURE 1: TERRORISTS AND MARKETS.

The S&P 500 (SPX), plotted here through Tuesday on the TD Ameritrade thinkorswim® platform, had its winning streak snapped after terrorists attacked two public sites in Belgium. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

Trouble at the Federal Reserve? Not all is rosy at the Fed these days as four of the 17 members of the Federal Open Market Committee have stepped up since last week’s no-decision on rate hikes to say enough already, according to CNBC. Patrick Harker, the new president of the Philadelphia Fed joined what CNBC called a “mini revolt” Tuesday night saying the Fed should “get on with” rate hikes and wants it to happen in April. John Williams of San Francisco and Dennis Lockhart of Atlanta said much the same earlier this week, and Kansas City Fed president Esther George was the sole dissenter at last week’s meeting. She called for a 0.25-basis point hike. Meanwhile, Fed Chair Janet Yellen said last week that every Fed meeting is considered “live,” meaning an interest-rate hike can come at any time. Typically, however, the Fed does not like to raise interest rates without a press conference following the decision, and there’s no press conference scheduled until the June meeting. The CME’s 30-day Fed Fund futures prices still sees only a 14% chance of a rate hike in April. It jumps to 46% in June.                 

Nike profit beats but shares fall. The sports-gear giant (NKE) surprised Wall Street again late Tuesday with an earnings beat on the bottom line but failed to meet expectations on the top line. On a per-share basis, NKE made $0.55, outpacing analyst projections of $0.49 a share. But revenues were light at $8.03 billion rather than the $8.2 billion anticipated. Analysts blamed the strength of the dollar for some problems, but we’ll be watching to see if this becomes a trend as the market heads into “earnings season.” NKE also purchased a big chunk of shares—24.3 million—that cut about 1.7% from the number of outstanding shares, thereby lifting its per-share profit basis.

Good Trading,
JJ
@TDAJJKinahan

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