Fed Officials Appear to Have Calmed the US Markets
Stocks in the US started off on a positive note after the Nikkei rallied nearly 2%, retracing some of the large declines seen from the middle of May to the tail end of June. Mid-day stock began to trade on the defensive and closed lower with the Nasdaq and S&P 500 barely changed. Fed officials appear to have calmed the markets, for the short term with FOMC members reiterating the lack of desire to taper the bond purchase program. The ADP private jobs report along with the BLS’s employment report will be the driving factors for US stocks during the balance of the week.
The July 30/31 Federal Reserve meeting looms ahead, but market consensus appears to believe that the September 17/18 is the first meeting where the Fed would consider tapering. This is contingent on employment which will only be released once prior to the July meeting.
Stocks received a boost on Monday from the ISM manufacturing report which bounced back into expansion territory at 50.9, after moving into contraction territory in May.
US May factory orders, and June vehicle sales were reported on Tuesday. Car sales continued to recover, with auto sales seen at a 15.96 million annual rate vs. 15.24 million in May, which is the largest rise in sale since 2007. Elsewhere, factory orders climbed 2% vs. 1% in April.
The large cap S&P 500 index tested resistance near the 50-day moving average near 1624, but failed to break this level and settled nearly unchanged. Momentum is gaining some strength as the MACD (moving average convergence divergence index) generated a buy signal as the spread crossed above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal on the S&P 500.
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