Market Direction Mid Week Update©

Market Direction: BULLISH alert issued 2/15/2018

FED hikes interest rates...

Stocks on Wednesday surrendered earlier gains to close lower after the Federal Reserve raised interest rates by 25 basis points, as widely anticipated, and indicated its intent to tighten once more in December.

Where are the major benchmarks trading?

The Dow Jones Industrial Average DJIA, -0.40% fell 106.93 points, or 0.4%, to 26,385.28. The S&P 500 SPX, -0.33% dropped 9.59 points, or 0.3%, to 2,905.97. The Nasdaq Composite Index COMP, -0.21% shed 17.11 points, or 0.2%, to 7,990.37.

All three benchmarks were nursing modest gains with about a half-hour left in trading before abruptly pivoting down.

Read: Fed interest-rate hike—a September rarity—could pressure stocks

The market’s reversal is in line with trading patterns on days when the central bank hikes rates as illustrated in the following chart from Bespoke Investment Group.

What drove the market?

Monetary-policy makers unanimously voted to hike the benchmark interest rate by a quarter-point to a range of 2% to 2.25% and predicted another hike by December and three more in 2019. The Fed also dropped the phrase that its policy remains “accommodative.” However, the removal of the word should be taken as an indication that the economy is performing as expected, emphasized Fed Chairman Jerome Powell during the news conference following the Fed’s announcement.

See: MarketWatch live blog: Fed Chairman Powell calls inflation ‘low and stable’

Aside from the Federal Open Market Committee, issues surrounding trade remained at the top of investors’ list of worries. While Wall Street has repeatedly ignored the threat of rising tariff tensions, focusing instead on strong economic data and corporate fundamentals, trade jitters have led to short-term volatility on fears that the situation could spiral out of control.

Powell said that although tense trade relations were on the central bank’s radar it hadn’t yet risen to the level of a significant concern for policy makers.

Earlier this week, Chinese officials fired back at President Donald Trump, accusing him of “trade bullyism” and pushing an “America First” agenda at the cost of international relations. The comments came as the latest exchange of tariffs took effect—10% tariffs on $200 billion worth of Chinese goods, which was met with tariffs on $60 billion in U.S. goods by China.

In the latest economic data, new-home sales rose 3.5% in August, more than had been expected.

What were analysts saying?

“It was virtually a foregone conclusion, and that may cause some investors to scratch their heads a bit given all the uncertainty in the market, with trade barbs flying, an unstable housing market, and ballooning federal debt,” said Mike Loewengart, vice president of investment strategy at E-Trade Financial Corp., in a note. “But the Fed needs to build up its toolbox to address a variety of economic conditions, which makes getting back to a normalized rate environment so important. They will drive towards that end state until the economic landscape is dramatically different.”

“The key takeaway from today’s meeting is that the committee is very much on the same page for the next few quarters. The Fed is highly likely to raise interest rates 25 basis points per quarter until next summer, when the target rate will reach the committee’s estimate of neutral,” said Eric Winograd, senior economist at AllianceBernstein.

Where were other markets trading?

Shares in Asia were broadly higher, with Hong Kong’s Hang Seng Index up more than 1%, while Japan’s Nikkei NIK, -0.32% rose for seven straight sessions. Major European markets were also modestly higher.

Crude-oil futures CLK9, +0.55% fell, retreating from a recent rally that has taken prices up about 2% this week, while gold prices GCM9, -0.56% settled lower. The U.S. dollar index DXY, -0.06% bounced around after the Fed’s rate increase and was recently trading slightly higher.

$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at  $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Share with a friend.

The all-time highs since our initial recommendation to go LONG this market. Here is how the markets have performed:

Stock Market Direction Recommendation (2/15/2018)
Dow	up 1,568.79 points a 6.23% gain	9/21/18
Nasdaq	up 876.87 points a 12.08% gain	8/30/18
S&P 500	up 209.71 points a 7.68% gain	9/21/18

Related Link: http://www.stockmarket-direction.com/