Market Update: Wednesday, June 15, 2016

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  • Stocks upbeat; Fed in focus. The Federal Open Market Committee (FOMC) will seek to soothe markets rattled over the Brexit and slowing jobs growth as it wraps up its June meeting today; no rate hike is expected. The S&P 500 closed slightly lower yesterday, dragged down almost single-handedly by financials trading in sympathy with European banks. However, sentiment shifted overnight and equities rose in both Asia and Europe. Major markets in England, France, and Germany have all rebounded more than 1% in Wednesday’s session. The Nikkei Index also gained ground amid a reversal in the yen, while news out of China drove the Shanghai Composite up 1.6%. Meanwhile, COMEX gold and Treasuries are stabilizing after rallying earlier this week; 10-year note yields are up slightly from yesterday’s close at 1.62%. Meanwhile, WTI crude oil is trading lower for a fifth straight day on an elevated inventory report.

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  • It’s Fed day. The FOMC statement is due at 2:00 p.m. ET today, along with the FOMC’s latest economic forecasts for gross domestic product (GDP), the unemployment rate, inflation, and fed funds projections for year-end 2016, 2017, 2018, and beyond (aka the “dot plots”). Following the release, at 2:30 p.m. ET, Federal Reserve Bank (Fed) Chair Janet Yellen will hold her second post-FOMC press conference of 2016. With a rate hike unlikely, the FOMC’s “dot plots” will likely be at the center of attention. Yellen’s press conference provides an opportunity for the Fed to add color to its view of the economy, inflation, and financial market volatility. Please see this week’s Weekly Economic Commentary for details.
  • Several news points out of China. China released new loans growth for May, increasing roughly 985 yuan ($150 billion). Technically, this is a good thing, as it shows economic activity in China. But given the concerns about China’s debt levels, simply increasing loans is not enough to show real stabilization in the economy. MSCI, the major provider of global equity indexes, decided not to include Chinese shares that trade on local exchanges in the emerging market indexes. This comes as a surprise to some international strategists, but doesn’t really move markets in China, which are generally not that sensitive to these types of issues.
  • Down four in a row. The S&P 500 fell only slightly yesterday, but it was still the first four-day losing streak since February. This was the third four-day losing streak of the year, versus 14 last year. Also, the S&P 500 is down 2.1% during this losing streak, versus -3.3% and -2.7% in the prior four-day losing streaks. The last time the S&P 500 was down five days in a row was during the February lows. Lastly, going back to 1970, the average day is higher 52.6% of the time, versus up 55.1% of the time, after a four-day losing streak.
  • 50-day as support? The S&P 500 managed to close off its lows yesterday on the highest volume in nearly two weeks. Additionally, it closed fractionally beneath its 50-day moving average. Should equities continue the pre-market bounce today, this technical trend line could provide potential support.

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Wednesday

  • Empire State Mfg. (Jun)
  • FOMC Statement
  • FOMC Economic and Dot Plot Forecasts
  • Yellen Press Conference
  • UK: Jobless Claims and Unemployment Rate (Apr)
  • Russia: GDP (Q1)

Thursday

Friday

  • Housing Starts (May)
  • Mario Draghi Speech in Munich
  • China: Property Price Indexes (May)

 

Click Here for our detailed Weekly Economic Calendar

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Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

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Treasury inflation-protected securities (TIPS) help eliminate inflation risk to your portfolio, as the principal is adjusted semiannually for inflation based on the Consumer Price Index (CPI)—while providing a real rate of return guaranteed by the U.S. government. However, a few things you need to be aware of is that the CPI might not accurately match the general inflation rate; so the principal balance on TIPS may not keep pace with the actual rate of inflation. The real interest yields on TIPS may rise, especially if there is a sharp spike in interest rates. If so, the rate of return on TIPS could lag behind other types of inflation-protected securities, like floating rate notes and T-bills. TIPs do not pay the inflation-adjusted balance until maturity, and the accrued principal on TIPS could decline, if there is deflation.

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