U.S. markets gave up its early gains as Wall Street awaited the Fed’s rate announcement at the conclusion of its two-day FOMC meeting. As expected, the Fed left interest rates unchanged with the market seeing some strength on the news.
However, the selling pressure returned into the final hour of action with the major indexes finishing mixed for the session.
The Russell 2000 gained 0.3% after trading to a midday high of 1,565 while closing back above its 50-day moving average. The Nasdaq slipped 0.2% following a backtest to 7,094 while holding crucial support at the 7,000 level.
The S&P 500 fell 0.7% after testing a low of 2,631 while the Dow also declined 0.7% after trading down to 23,886.
Both indexes remained trapped between their 50-day and 200-day moving averages.
Energy was the only sector that closed higher after advancing 0.4%. Consumer Staples sagged 2% while Health Care sank 1.4% to pace the laggards.
Global Economy – European markets were higher across the board following better-than-expected economic news. Germany’s DAX 30 surged 1.5% while the Stoxx 600 Europe was up 0.6%. The Belgium20 and UK’s FTSE 100 added 0.3% while France’s CAC 40 climbed 0.2%.
The Eurozone Apr Markit Manufacturing PMI was revised higher to 56.2 from 56.
Eurozone Q1 GDP rose 0.4% quarter-over-quarter and 2.5% year-over-year, matching forecasts.
The Eurozone March unemployment rate was flat at 8.5%, matching expectations.
The UK April Markit/CIPS Construction PMI rose 5.5 to 52.5, stronger than forecasts for a rise of 3.5.
Asian markets closed mostly lower with Australia’s S&P/ASX 200 bucking the trend after rising 0.6%. South Korea’s Kospi gave back 0.4% and Hong Kong’s Hang Seng fell 0.3%. Japan’s Nikkei slipped 0.2% and China’s Shanghai dipped a tenth-point.
The China April Caixin Manufacturing PMI unexpectedly rose 0.1 to 51.1, topping forecasts for a dip of 0.1 to 50.9.
Japan April Consumer Confidence fell 0.7 to 43.6, weaker than expectations for a gain of 0.2 to 44.5.
MBA Mortgage Applications sank 2.5%, accompanied by a 1.6% drop in the purchase index and a 3.5% decline in the refinancing index for the week ending April 27th.
The 30-year mortgage rate jumped 7 basis points to 4.80% and represents the highest level since September 2013.
ADP Employment Report increased 204,000 in April, versus expectations for a print of 190,000 private payroll additions. The service sector added 160,000 workers while the goods producing sector added 44,000.
For the latter, manufacturing jobs were up 10,000 with construction jobs adding 27,000. In services, trade/transport jobs were up 14,000. Health/education jobs increased 39,000 while Leisure/hospitality rose 36,000.
Small firms added 62,000, medium firms were up 88,000, and large companies added 54,000. This was another very solid employment report.
Market Sentiment – The FOMC announcement was close to expectations as the Fed noted the rise in inflation, but didn’t stress it, while reiterating the moderate pace of economic growth.
There were no surprises in the statement indicating any policymaker concerns over inflation and that the Fed might be getting behind the curve.
For now it’s steady as it goes as traders turn their focus towards Friday’s jobs report, the remainder of earnings this week, and possible news from the China trade summit.
The iShares 20+ Year Treasury Bond ETF (TLT) held positive territory throughout much of the session while reaching a peak of $118.86. Lower resistance at $118.75-$119 and the 50-day moving average easily held with continued closes above the latter being a slightly bullish development.
Near-term support remains at $118-$117.75 following backtest to $118.26 ahead of the closing bell.
Market Analysis – The Spiders Dow Jones Industrial Average ETF (DIA) extended its losing streak to four-straight sessions after testing a low of $238.56 intraday.
Support at $238-$237.50 held with a close below the latter likely leading to a further backtest to $236-$235.50. Near-term resistance is at $239.50-$240.
RSI is in a downtrend with support at 40 now in play. There is risk to 30 and February/ March lows on continued weakness. Resistance is at 45-50.
The Consumer Discretionary Select Spiders (XLY) slipped for the 2nd-time in 3 sessions following the backtest to $103.02.
Upper support at $103.25-$103 and the 50-day moving average was breached with a close below $102.50 (and the 100-day moving average) being a bearish development.
Near-term resistance is at $103.50-$104.
RSI is trying to hold support at 50 with risk to 45-40 on a move below this level. Resistance is at 55-60 with the latter representing the multi-month high.
All the best,