Market Update: Wednesday, February 22, 2017

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  • Stocks edge off of record highs, Fed minutes in focus. (10:07am ET) U.S. markets are slightly lower this morning, and foreign indexes are trading on a somewhat cautious note as traders await the minutes from last month’s Federal Open Market Committee (FOMC) meeting. Looking back, all three major U.S. averages set record highs for the second consecutive session on Tuesday. The S&P 500 closed up 0.6%, led by real estate (+1.3%) and energy (+0.7%), which moved in tandem with oil prices. Overnight in Asia, equities were mostly higher; Japan’s Nikkei closed flat though, after the Bank of Japan (BOJ) Governor tempered expectations for another rate cut. Most European indexes are little changed late in the session; the STOXX Europe 600 is lower by 0.1% while Italy’s MIB (-1.2%) lags. Finally, WTI crude oil ($53.55/barrel) is down 1.4%, COMEX gold ($1238/oz.) is unchanged, and Treasuries are erasing yesterday’s modest losses as the yield on the 10-year note has moved back down to 2.41%.

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  • German economy grows. German business sentiment indicators, the IFO indices, were released this morning and were higher than previous readings and expectations. Inflation on a yearly basis was 1.8%, still below the European Central Bank‘s 2% target and therefore unlikely to significantly change the direction of monetary policy. German inflation was 1.9%, somewhat worrying for the inflation-phobic Germans.
  • U.K. GDP surprises to upside. Growth came in at 0.7% for the quarter, better than the 0.6% forecast. However, the numbers were boosted by a sharp rise in exports and reduction in imports, due in large part to the weakness in the British pound. Trade surpluses of this magnitude are not likely to be sustained should the pound stabilize.
  • FOMC minutes due at 2:00pm ET. The minutes of the January 31-February 2, 2017 FOMC–the first of 2017–are due out at 2 PM today. Ordinarily, the minutes would get plenty of scrutiny from market participants, looking for clues as to the timing of the Fed’s next move on rates. But because Fed Chair Yellen provided her semiannual Monetary Policy Testimony to Congress last week, and took well over four hours of Q&A, there is not likely to be too much “news” in today’s minutes.
  • Crude break out? Crude oil closed at its highest level since July 2015 yesterday, trading as high as $55/barrel before selling off late in the day. We took a look at crude oil fundamentals, issues, and policies in our latest Weekly Economic Commentary, so today on the LPL Research blog we will examine the technicals. It is important to note just how tight the consolidation has been as crude attempts to break out. Over the past nine weeks, crude oil has traded in a range of less than nine percent. This happens only six percent of the time and the last time it happened was July 2014, right before the 75% drop the next 19 months into the February 2015 lows. The bottom line is the coil is very tight on crude oil and a big move could be coming soon. Be sure to read the blog later today for more thoughts on this important commodity.

 

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Click Here for our detailed Weekly Economic Calendar

Wednesday

  • Existing Home Sales (Jan)
  • FOMC Minutes
  • Germany: Ifo (Feb)
  • OPEC Technical Meeting in Vienna
  • Brazil: Central Bank Meeting (Rate Cut Expected)

 Thursday

 Friday

  • New Home Sales (Jan)

 

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