U.S. markets traded in a relatively tight range after opening higher while finishing the session mixed. While most sectors showed gains, the financials got whacked, falling 1.7%, amid a drop in the yield on the benchmark 10-year treasury note. The Consumer Discretionary sector also traded lower and was down 0.8% for the session.
Gold pulled back off Wednesday’s $1,350 level and a 2017 high, after settling just below $1,340 an ounce.
Global Economy – European markets showed strength as eurozone economic growth figures were raised along with the European Central Bank leaving monetary policy intact. The Belgium20 rallied 0.8% and the DAX 30 jumped 0.7%. The FTSE 100 added 0.6% while France’s CAC 40 index and the Stoxx Europe 600 climbed 0.3%.
The ECB said it would continue its asset-purchase program at 60 billion euro (or $71 billion) a month through the end of 2017, or beyond, and that stimulus measures could be ramped up if the outlook deteriorates.
Eurostat said the eurozone economy was 2.3% larger in the three months through June than it was in the year-ago period. This would be fastest rate of growth recorded since the first three months of 2011.
Asian markets were mixed on economic news after Australia showed a lower than expected trade surplus. South Korea’s Kospi surged 1.1% while Japan’s Nikkei climbed 0.2%. Australia’s S&P/ASX 200 edged higher by a tenth-point, or 0.0%. China’s Shanghai index was down 0.6% and Hong Kong’s Hang Seng Index gave back 0.3%.
Australia posted a seasonally adjusted trade surplus of A$460 million in July, lower than analysts’ expectations of a surplus of A$1 billion. The value of exports fell by 2.0%, while the value of imports fell by 1.0% in July from June.
U.S. initial jobless claims jumped 62,000 to 298,000 in the first week of September. Q2 productivity was revised up to a 1.5% growth rate for the final read, versus the 0.9% gain previously reported.
Market Sentiment – Loretta Mester said she’s comfortable with another rate hike this year and added remaining sidelined from now until March is not her idea of gradual. She added the gradual path of the dot plot is about right (the Fed has one more hike this year in it’s dot plot estimate).
She has not built in any fiscal stimulus into her projections. On the composition of the Fed, she noted it’s set up to have changes in leadership, lauding Chair Yellen, while stating Fischer’s retirement will be a loss.
William Dudley, Raphael Bostic, and Esther George will be speaking later this evening.
The iShares 20+ Year Treasury Bond ETF (TLT) traded higher throughout the session while reaching a peak of $129.57 intraday. Upper resistance at $128.50-$129 was cleared with continued closes above the latter leading to $130-$132. Rising support is at $128.25-$128.
Market Analysis- The Russell 2000 ETF (IWM) has been struggling with near-term resistance at $139.75-$140 and its 50-day moving average over the past five sessions. Continued closes above the latter would be a bullish development for a run towards $141-$142. Support is at $138.50-$138.
A move below the latter would be a slightly bearish development with risk to $137 and the 200-day moving average.
Airline stocks have been weak of late with US Global Jets (JETS) being the only pure-play airline ETF at the moment. It’s a relatively new fund with an inception date of April 30, 2015 that invests primarily in domestic airline companies.
The chart below show near-term support at $28-$27.75 and represents the mid-April breakout above these levels. A move below the latter could lead to further weakness to $27.50-$27. Resistance is at $28.50-$28.75 followed by $29-$29.25 and the 200-day moving average.
All the best,
Roger Scott