U.S. markets rebounded on Wednesday to snap a two-session slide following a choppy session while booking monthly gains.

The major indexes slipped into negative territory late in the afternoon after the Federal Reserve hinted that it is set to raise interest rates as early as its next meeting in March before closing the session mostly higher.

The Dow added 0.3% after testing a high of 26,338 while the S&P 500 climbed 0.1% after making a run to 2,839. For the month, both indexes were up 5.8% and 5.6%, respectively, to extend their monthly win streaks to 10-straight.

The Nasdaq was up 0.1% after trading a high of 7,453 before slipping below the 7,400 level late in the session.

This area of support held for the 8th-straight session with the index gaining 7.4% for the month.

The Russell 2000 opened higher to reach a peak of 1,594 before slipping into negative territory an hour into trading. The mid-January lows were taken out on the backtest to 1,571 and the 0.5% negative close to lower the small-caps monthly gain to 2.7%.

Real Estate and Utilities showed sector strength after jumping 2.1% and 1.1%, respectively. Health Care sank 1.4% while Consumer Staples and Consumer Discretionary gave back 0.5% and 0.3%, respectively, and were the only three sectors in the red.

For the month, Consumer Discretionary and Health Care surged 9.6% and 8.1% while Financials and Technology spiked 6.3% and 6.2%. Utilities and Real Estate were the only sector laggards after sliding 4.2% and 3.9%.

Global Economy – European markets were mostly lower with the Stoxx Europe 600 declined 0.2%. The broader market index for Europe was up 1.6% for the month, its biggest monthly advance since October.

UK’s FTSE 100 sank 0.7% and the Belgium20 gave back 0.4%. Germany’s DAX 30 dipped 0.1% while France’s CAC 40 was higher by 0.2%.

Eurozone January CPI rose 1.3% from year ago levels, stronger than expectations of 1.2%. The January core CPI rose 1% year-over-year, matching expectations.

ECB Executive Board member Coeure said Eurozone inflation will converge at a vert gradual pace toward the ECB’s goal, justifying the need to continue providing stimulus.

The German January unemployment change fell 25,000 to 2.415 million, stronger than expectations for a drop of 17,000. The January unemployment rate fell 0.1% to 5.4%, matching forecasts.

German December retail sales declined 1.9% month-over-month, weaker than expectations of for a dip of 0.4%.

Asian markets were mixed with Japan’s Nikkei falling 0.8% to extend its losing streak to 6-straight sessions.

China’s Shanghai slipped 0.2% while South Korea’s Kospi dipped 0.1%. Hong Kong’s Hang Seng gained 0.9% and Australia’s S&P/ASX 200 rose 0.3%.

The China January manufacturing PMI gave back 0.3 to 51.3, weaker than expectations of no change at 51.6. The January non-manufacturing PMI was up 0.3 to 55.3, topping expectations for a decline of 0.1.

Japan December industrial production rose 2.7% month-over-month, stronger than expectations of for a rise of 1.5%.

MBA Mortgage Applications tumbled 2.6%, along with a 3.4% drop in the purchase index for the week ending January 26th. The refinancing index stumbled 2.9% .

The average 30-year fixed mortgage rate rose 5 basis points to 4.41%. Mortgage rates have popped above the 4.5% level this week to the highest level in over a year

The January ADP Employment Report of 234,000 topped expectations of 195,000.

Employment Cost Index was up 0.6%, right on forecasts.

Chicago PMI fell 2.1 points in January to 65.7, ahead of expectations for a print of 64, but represented the first decline since July. The 3-month moving average edged up to 66.4 from 66.3.

U.S. Pending Home Sales Index rose 0.5% to 110.1 in December, matching forecasts. Regionally, sales were mixed with the South rising 2.6%, and the West up 1.5%, and falling 5.1% in the Northeast and were down 0.3% in the Midwest.

The index was at 109.5 a year ago. However, the index declined 1.8% year-over-year versus the prior 0.6% year ago level gain in November.

Market Sentiment – The FOMC left Federal Funds Rate unchanged, as expected, at 1.25%-1.50%. The Fed left the door open for a rate increase in March, which is also widely anticipated by the market.

The January meeting was also the last one chaired by Janet Yellen who will succeeded by Jerome Powell as Fed chief next month.

The iShares 20+ Year Treasury Bond ETF (TLT) snapped a 3-session slide after trading up to $122.89. Upper resistance at $122.50-$122.75 held with additional hurdles at $123.75-$124 and the 200-day moving average. Support remains at $122-$121.50.

Market Analysis – The Russell 2000 ETF (IWM) tested a high of $158.42 shortly after the opening bell with upper resistance at $158-$158.50 holding.

The fade to $155.92 held shaky support at $156-$155.50 with risk to $154-$153.75 and the 50-day moving average on a close below the latter.

RSI is trying to hold December support at 50 with a close below this level being a bearish development with risk to 40.

The Health Care Select Sector Spider (XLV) failed resistance at $90-$90.25 following the opening pop to $90.09. Continued closes above the latter would be a slightly bullish signal for another possible push towards all-time highs just south of the $92 level.

Fresh support is at $88-$89.50 with a close below the latter signaling additional weakness.

RSI remains in a downtrend with December support at 50 in focus.

Existing / New Position Update

TSLA remains stable and price appears to be heading higher.

We may expect some further upside, since the stock’s been stable and resilient to downside pressure as of late.

SVXY bull put is showing signs of strength. Put volatility is declining and moving back to the bull side of the market.

Volatility lead the markets higher today and we can expect more upside, unless both FED and earnings data disappoints investors.

NFLX bear call spread was initiated with intent of turning position to iron condor if in fact price declines a bit more.

The price of the stock has risen beyond fair value last few months and I’m expecting mild downside pressure to follow.

Volatility is declining once again…which will help out positions decline even further.

Roger Scott