When Fed Doves Cry, Equities Fly!
Today’s Spotlight Market
Traders got some mixed economic data on Thursday which will do little to sway the Fed from remaining cautious on when it should announce the first interest rate hike since 2006. The consumer price index in May rose by 0.4% which would normally strike fears of rising inflation; however the price gain was below the 0.5% increase economists were expecting. In addition, the annual inflation rate is still below the Fed?s targeted level of 2%, sparking little in the way of an inflation scare to force the Fed to act sooner rather than later to start to raise rates. On the employment front, initial jobless claims fell by 12,000 last week to a seasonally adjusted 267,000, which was better than the forecasted 276,000 claims traders expected. While the employment picture appears to be improving, workers? wages have not increased dramatically, which is keeping wage inflation in check and the Fed on hold for an interest rate hike this summer.??? ?
Fundamentals
The Federal Reserve appears to have put the kibosh on any interest rate hikes this summer, as a cut in the economic growth expectations, as well as a downward revision in interest rate projections for the next two years as traders pricing in the odds first Fed Interest rate hike out to late Q4 of this year. Fed Chair Janet Yellen sounded a more ?dovish? tone during the press conference following the 2-day Fed Open Market Committee (FOMC) meeting that ended on Wednesday. While Yellen noted some improvement in the U.S. labor market, there were still some concerns that the economy was not yet ready to sustain an increase in interest rates and would remain ?data dependent? to help determine the time table for an interest rate increase. Among the most notable market reactions following the Fed meeting was a rally in U.S. equities and a sell-off in the U.S. Dollar, in particular against the Euro currency.? The Dollars reaction was noteworthy given the continued concerns of a lack of an agreement between Greece and its European creditor?s regarding additional funding to prevent a Greek default on its debt payments due at the end of June.???
Technical Notes
Looking at the daily chart for the September E-mini S&P 500 futures, we notice the market breaking out of its recent mini-correction on Thursday, as the index posted gains of over 1.4% as of this writing. Prices are once again trading above the 20-day moving average and momentum as measured by the 14-day RSI has turned positive with a current reading of 57.42. For the lead month September futures we see support at 2061.00, with resistance found at 2126.25.