U.S. markets continued this week’s pattern of trading higher into the afternoon before experiencing final hour weakness to settle mixed on Thursday.
Traders continue to watch the action in the 10-year note as it inches closer to a 3% yield before deciding to commit new money or bail on a possible market pullback, if triggered.
The Dow gained 0.6% after holding positive territory throughout the session while testing a high of 25,156. Resistance at 25,000 held for the third-straight session.
The S&P 500 climbed 0.1% after reaching an intraday peak of 2,731 before sliding below 2,700 late in the day.
The index held this level for the fifth-straight session despite the final hour fade.
The Nasdaq gave back 0.1% to extend its losing streak to 4-straight sessions and its longest since November 2016. The index held the 7,200 level for the 5th-straight session following a backtest to 7,194.
The Russell 2000 also slipped 0.1% after testing 1,548 while failing its 50-day moving average for a 4th-straight session.
Real Estate and Energy rebounded from prior session losses to led sector strength after rising 1.1%.
Financials and Health Care were the only sector laggards after falling 0.8% and 0.2%, respectively.
Global Economy – European markets were mixed with the Belgium20 making the biggest move after rising 0.7%. France’s CAC 40 gained 0.1%. UK’s FTSE 100 declined 0.4% and the Stoxx Europe 600 slipped 0.2%.
Germany’s DAX 30 dipped 0.1%.
The German February IFO business climate fell 2.2 to a 5-month low of 115.4, weaker than expectations for a decline of 0.6.
UK Q4 GDP was revised downward to growth of 0.4% quarter-over-quarter and 1.4% year-over-year from a previously forecast of 0.5% and 1.5%, respectively
Asian markets were mostly lower aside from China’s Shanghai which gained 2.2% after the week-long Lunar New Year holiday to rally to a 2-week high. Hong Kong’s Hang Seng sank 1.5% and Japan’s Nikkei fell 1.1%.
South Korea’s Kospi dropped 0.6% while Australia’s S&P/ASX 200 added 0.1%.
Initial jobless claims declined 7,000 to 222,000 for the week ending February 17th.
February Kansas City Fed Manufacturing Index Level checked in at 17 versus forecasts of 16.5.
The leading economic indicators index rose 1% to 108.1 in January, a new record high.
Bloomberg Consumer Comfort Index checked in at 56.6 for the week ending February 18th.
Market Sentiment – Fed Governor Quarles said the U.S. economy is in the best shape since the financial crisis.
He sees a strong labor market and likely only temporary softness in inflation as appropriate signs that monetary policy should continue to be gradually normalized.
St. Louis Fed President Bullard said the Fed needs to be careful not to increase interest rates too quickly this year because that could have a restrictive effect on the economy.
Atlanta Fed’s Bostic said the Fed is carefully calibrating a return to normalcy, including reducing the balance sheet. He said things continue to look up, referring to the economy.
New York Fed Dudley focused on post-hurricane rebuilding efforts in Puerto Rico and the Virgin Islands but didn’t comment on U.S. policy or the economy.
He said it was time to start from scratch on Puerto Rico’s energy infrastructure, as it will take many more months to restore electricity there and the grid remains a major obstacle to recovery in the region.
He also noted that 4% of jobs were lost there after the hurricanes, but the jobs market has since stabilized due to hospitality and construction.
The iShares 20+ Year Treasury Bond ETF (TLT) traded in positive territory throughout the session while reaching a peak of $117.66.
Lowered resistance is at $117-$117.50 with continued closes above the latter signaling a short-term bottom. Support remains at $116.50-$116 with the 52-week low at $116.49.
Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) traded higher for the 7th time in 9 sessions following today’s push to $251.36.
Near-term resistance at $251-$251.50 and the 50-day moving average held with a close back above the latter being a continued bullish development.
Support is at $248.50-$248 with a move below the latter being a bearish signal with risk to $245.
RSI is trying to clear and hold near-term resistance at 50 with continued closes above this level being a bullish signal for a possible push towards 60 and prior November support levels.
There is risk to 40 on a pullback.
The Consumer Discretionary Select Spiders (XLY) has been in a tight range over the past five sessions following the recent close back above its 50-day moving average earlier this month.
Resistance at $105-$105.50 was split on today’s run to $105.25 with a close above $106 being a bullish signal.
Near-term support at $104.25-$103.75 with a move below the latter signaling additional weakness.
RSI has been holding near-term support at 50 with a close below this level leading to a possible backtest to 40. Resistance is at 60 that represented October and early November support levels.
All the best,