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Fear Factor Back on Street After Terror Attacks in Brussels

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March 22, 2016

(Tuesday Pre-Market) Terror attacks in Brussels early Tuesday brought fear into the U.S. stock market, pushing indices lower and boosting prices of safe-haven assets like gold and the U.S. dollar.

U.S. stocks followed European stocks lower as markets reacted to the attacks that took place in Belgium’s capital, including at the airport and at a subway station. The attacks killed at least 27 and injured many more, according to media reports. Some European indices fell more than 1% in the immediate aftermath of the attacks, but recently came back slightly and were trading 0.3% to 0.6% lower. Crude oil futures also fell slightly.

Meanwhile, some safe havens like gold and the dollar climbed after the attacks, with gold recently up 0.6% to around $1,252, and the euro falling to $1.12. The yen and Swiss franc also rose. The dollar index rebounded from recent lows, and also may have been getting some help from two Federal Reserve members who spoke on Monday and both argued that a U.S. rate hike may be in order in the coming months (see below). Fed speakers today include Chicago Fed President Charles Evans and Philadelphia Fed President Patrick Harker.

In other news, new home sales are on tap Wednesday. The National Association of Realtors (NAR) said on Monday that existing U.S. home sales tumbled 7.1 percent in February to an annual rate of 5.08 million units, the lowest level since November. The NAR blamed the weakness on low supply levels and strong price growth. Stock indices came under pressure after the news.

On the earnings front, Nike reports Tuesday. Analysts estimate earnings of 48 cents a share for the period ending in February, up 9% from the same period a year ago, The Wall Street Journal reported. Nike has exceeded Wall Street’s estimates for 14 quarters in a row and all but twice over the past five years. Revenue is expected to have risen 10% to $8.2 billion.

 

S&P 500

FIGURE 1: SPX BUILDS ON GAINS.

The S&P 500 (SPX), plotted here through Monday on the TD Ameritrade thinkorswim® platform, gained slightly on Monday, building on last week's rally. Data source: Standard & Poor’s. For illustrative purposes only. Past performance does not guarantee future results.

April Interest Rate Hike? There’s a case to be made that interest rates should rise as soon as next month, Atlanta Fed President Dennis Lockhart said in prepared remarks Monday. “In my opinion, there is sufficient momentum evidenced by the economic data to justify a further step at one of the coming meetings, possibly as early as the meeting scheduled for end of April,” Lockhart said. Separately, San Francisco Fed President John Williams said he’s open to a rate hike in April or June. And Richmond Fed president Jeffrey Lacker noted in separate prepared remarks Monday that central bank members are feeling confident that the job market will continue to improve and that the Fed’s 2% inflation-rate target is achievable in the medium-term. The next meeting is scheduled for April 26-27. Typically the Fed does not like to raise rates without a press conference following the announcement, but one isn’t planned until its June 15 meeting.  

Treasury Yields Rise, Then Fall: The yield on the benchmark 10-year Treasury notes climbed back above 1.9% on Monday, their largest single-day jump in more than a week, propelled by what was seen as more hawkish comments by Fed officals. But yields fell below that level early Tuesday in the wake of the Brussels attacks as safe havens like U.S. Treasuries rallied. However, the bond market's reaction to the attacks wasn't as bad as might have been expected.

New Phones at Apple: The people spoke and Apple (AAPL) listened, but the market reacted with a thud. The technology giant on Monday unveiled the latest version of its flagship smartphone: the iPhone SE, with a four-inch screen, upgraded camera and Apple Pay capability built in. It will be at the lowest starting point ever—$399. Apple also is bringing out a smaller version of its iPad Pro at 9.7 inches, which is the size of its mainline iPads. The cost on that is $599 and it will begin shipping next week. Additionally, the price of the Apple Watch just got more affordable at $299, down from $349. After all that news, Apple shares barely moved. That’s a big change from the old days, when an Apple announcement like this would have had people on the edge of their seats.

Good Trading,
JJ
@TDAJJKinahan


Economic Report Calendar

FIGURE 2: THIS WEEK'S ECONOMIC REPORT CALENDAR.

Source: Briefing.com

Market Update Webcast Video

Last week, JJ Kinahan and Craig Laffman of TD Ameritrade participated in a webcast in which they discussed the world economy, crude prices, what to look for in coming economic reports, the potential impact of Fed policy on the markets, and other topics.

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