The market today was mixed with the DOW down 21 and the NASDAQ up 14. The S&P 500 was flat. The DOW was negatively impacted by INTC; lower on its takeover of MBLY. In addition, MRK was down as the controversy over the proposed new health care replacement plan plays out in Washington, D.C. IBM was lower today as it starts to roll over a bit after its nice upward run earlier this year. The NASDAQ was helped by gains in PCLN at further new highs along with gains in AMZN and NVDA.
Breadth numbers were overall positive at a 17/12 upside ratio courtesy of the Russell 2000 Index.
The next big event will be Wednesday’s Fed decision to raise rates. It is my opinion that they have boxed themselves into a corner because all of this chatter about a hike coming before the most recent collapse of oil prices. The overwhelming increase in drilling rigs here and the record U.S. inventories have more than offset this wish by those producers to get prices higher. Crude oil today was $49 a barrel. In addition, gold prices are at $1,203 an ounce, down from over $1,250.
The economic reports that will be released ahead of the Fed decision are going to show weakness in pricing pressures. The February P.P.I. is projected to show an increase of only 0.1% compared to 0.6% the month before. On Tuesday we get the February C.P.I. which is supposed to be unchanged from 0.6% the prior month. In addition, February retail sales are supposed to have gains of only 0.1% versus an advance of 0.4% the prior month. So, how do numbers of this sort justify a rate increase? The Fed will point to the continued stronger jobs reports and low unemployment rate to justify what they are going to do.
The focus should be on what Chairperson Janet Yellen says regarding the future pace of hikes. If she hints at more than three this year, it would be a negative and taken as a sign that the Feds could be interfering with the economic growth situation. Domestic growth has not been robust lately…and it does not show any signs of getting much better in the current year. Unfortunately, Mrs. Yellen has not called me to ask my opinion. If she does, I will tell her to stand pat.
Donald M. Selkin
These are excerpts from Don Selkin’s Daily Market Notes, abbreviated and updated with permission from the author. Don Selkin is the Chief Market Strategist at Newbridge Securities Corporation, member FINRA/SIPC and provides the Fair Value analysis for CNBC each morning. The commentary provided in this Market Letter is intended to provide timely market analysis and should not be considered a research report. This Market Letter may contain, and is limited to: Discussions of broad based indices; Commentaries on economic, political or market conditions; Technical analyses concerning the demand and supply for a sector, index or industry based in trading volume and price; Statistical summaries of multiple companies’ financial data, including listings of current ratings; and, Recommendations regarding increasing or decreasing holdings in particular industries or securities. This Market Letter does not make a financial or investment recommendation or otherwise promotes a product or service of the firm. This Market Letter contains only news, facts, and commentary on information previously reported from a news source believed to be accurate and reliable by the author. These news sources include the following: Bloomberg Financial, Reuters, and the Associated Press.