Market Action –U.S. markets resumed their tight trading range on Thursday following a second day of comments on monetary policy from Federal Reserve Chair Janet Yellen. There was some strength at the start of trading but all-time highs were put on hold following the choppy action afterwards. Tomorrow’s earnings reports from several banking stocks also played a role in the hesitation to higher highs but the positive closes across the board for the major indexes were bullish signs.
Global Economy – European markets were mostly higher after learning the Fed would be in no rush to raise interest rates here at home. The Stoxx Europe 600 notched its biggest one-day percentage gain in nearly three months after rising 1.5%. The U.K.’s FTSE 100 index failed to join the rally after a small pullback. Asian markets were also up, led by Hong Kong’s Hang Seng’s 1.6% gain, and a fresh two-year intraday high for the index.
Chinese trade data showed China June exports and imports both rose more than expected. June exports rose +11.3% year-over-year, stronger than expectations for +8.9%. June imports rose +17.2% year-over-year, and higher than forecasts for +14.5%. The trade balance was in surplus by $42.8 billion, wider than expectations of $42.6 billion.
ECB Governing Council member Rimsevics said Quantitative Easing would continue for a few more years.
U.S. Economy- Initial jobless claims fell 3,000 to 247,000 in the week ended July 8 after rising 6,000 to 250,000 in the July 1 week and revised from 248,000. The 4-week moving average checked-in at 245,750, up from 243,5000 and revised from 243,000.
Continuing claims dropped 20,000 to 1,945,000 in the July 1 week, erasing the 20,000 advance to 1,965,000 previously and revised from 1,956,000.
The Bloomberg Consumer Comfort Index Level came in at 47.0 for the week ending July 9.
U.S. PPI edged up 0.1% in June, with the core up 0.1%, as well. There were no revisions to May which posted a flat reading with a 0.3% increase in the ex-food and energy component. On an annual basis, PPI slowed to a 2.0% year-over-year rate from 2.4%.
The Fed Balance Sheet Level was just reported at $4.467 trillion for the week ending July 12.
The Money Supply M2 Weekly Change was -$30.8 billion for the week ending July 3.
Market Sentiment- Janet Yellen concluded her 2-day testimony today. She made no attempt to walk back the cautiously optimistic tone from her prior testimony where she hedged the softer inflation dynamics. The other takeaway for the market was her comments that the balance sheet unwound is likely to push up rates at the long end.
The iShares 20+ Year Treasury Bond ETF (TLT) fell back below its 50-day moving average after testing a low of $122.81. This gets prior support is at $122-$121.75 and the 100/200-day moving averages back in the mix. Lowered resistance is at $123.75-$124.
Market Analysis- Tech traded higher and showed a little follow through for the 5th-straight session. The higher high and higher low posted by the PowerShares QQQ ETF (QQQ) was a continued bullish signal following Wednesday’s breakout above the 50-day moving average. Today’s high reached $141.35 with fresh resistance at $142-$142.50. A close above the latter gets all-time highs and a run towards $144-$145 in play. Short-term support is at $140-$139.25.
The iShares PHLX Semiconductor ETF (SOXX) made a run towards fresh resistance at $149-$150 on the intraday high of $149.16. This week’s move above the 50-day moving average has recovered some of train wreck on the drop from the $155 level in early June to $142.50. Current support is at $147.50-$147.
The 2-day debacle in the SOXX also led Tech lower over the same time period as you will notice in the aforementioned QQQ chart. The semiconductors pulled back slightly despite Tech’s higher bid today but here’s what’s important about the current setup.
The chip sector is made up of more speculative stocks than the broader QQQ’s and were leading Tech stocks higher at the open. If the semiconductor sector can maintain momentum and clear the $150 level, it should also lead Tech in its attempt to breakout to fresh all-time highs. If so, look for the SOXX to make a push towards $152.50-$155 in the coming weeks.
All the best,