2017-06-14 02:48:10 UTC
Keris Alison Lahiff Keris Alison Lahiff Follow Jun 13, 2017 10:45 AM EDT
Market opens higher amid 'Fed drift' Market opens higher amid 'Fed drift'
13 Hours Ago | 03:57
U.S. equities closed higher on Tuesday as large-cap technology stocks
came back from their biggest two-day decline since December.
The Dow Jones industrial average advanced about 90 points to hit
intraday and closing records, with 3M and Goldman Sachs the most gains.
Apple also contributed gains to the 30-stock index.
The S&P 500 gained about half a percent on its way to a record close,
with information technology and materials leading advancers. Shares of
Apple, Google-Parent Alphabet and Tesla all rose, pushing the Nasdaq
composite 0.7 percent higher.
"We don't want to dramatically overweight the [tech] sector, but we
still want to participate in it," said John Traynor, CIO at People's
United Bank. "You're seeing some good top-line growth in these names."
Katie Stockton, chief technical strategist at BTIG, said the Nasdaq 100
futures had taken a respite Tuesday before the bell "from the pullback
that has characterized the technology sector in the last two days."
"There is room to short-term oversold territory, so we would assume the
pullback still has a hold, although it is likely to mature in the next
few days," Stockton said.
Technology stocks have easily outperformed this year, with the S&P
information technology sector advancing 17.6 percent. By comparison,
health care — the second-best performer in the S&P — had risen 12.1 for
2017 entering Tuesday's session.
The Nasdaq completed a 2.31 percent two-day pullback on Monday as
valuation concerns around the sector escalated.
A trader works on the floor of the New York Stock Exchange (NYSE) in New
Brendan McDermid | Reuters
A trader works on the floor of the New York Stock Exchange (NYSE) in New
A survey of fund managers released Tuesday by Bank of America Merrill
Lynch showed the Nasdaq at the top of the most-crowded trade list. The
survey also showed that 84 percent of fund managers believe the U.S. is
the most overvalued equity market.
Still, it's "important to note that the last two days have shown little
to no real signs of weakness with pullback attempts in S&P, DJIA holding
and rallying back to unchanged," said Mark Newton, managing partner at
Newton Advisors, in a note.
"The Tech selloff looks nearly complete in the short run with XLK ...
down to weekly support near trendlines from last November," he said.
Investors also kept an eye on the Federal Reserve as the central bank
kicked off a two-day monetary policy meeting on Tuesday. Investors
largely expect the central bank to raise interest rates by a quarter
point. Market expectations for a June rate hike were 99.6 percent,
according to the CME Group's FedWatch tool.
Investors will also look for clues about how the Fed plans to unwind its
massive $4.5 trillion balance sheet.
The Fed opened that can of worms a few meetings ago," said Minh Trang,
senior FX trader at Silicon Valley Bank. "At this point, there could be
a dual-policy approach with raising rates on one hand and reducing the
balance sheet on the other."
In economic news, the National Federation of Independent Business'
(NFIB) small business optimism index came in unchanged at 104.5 for May.
Meanwhile, U.S. producer prices remained unchanged last month as energy
costs recorded their biggest decline in more than a year, suggesting
inflation pressures were easing after rising at the start of the year.
DJIA Dow Industrials 21328.47 92.80 0.44%
S&P 500 S&P 500 Index 2440.35 10.96 0.45%
NASDAQ NASDAQ Composite 6220.37 44.90 0.73%
Stocks were solidly higher on Tuesday, June 13, in a rebound from two
days of heavy losses in the tech sector.
The S&P 500 was up 0.28%, the Dow Jones Industrial Average gained 0.27%,
and the Nasdaq rose 0.6%. The Dow briefly touched an intraday record
high of 21,307.41.
Benchmark indexes, the Nasdaq in particular, have been under pressure
after the tech sector fell from recent gains and dragged overall markets
down with it. The sudden selloff was partially tied to a note from
Goldman Sachs that cautioned investors not to think of the sector as a
safe haven. The Nasdaq fell 2.3% over the past two sessions.
The FAANG stocks --Facebook Inc. (FB) , Apple Inc. (AAPL) , Amazon Inc.
(AMZN) , Netflix Inc. (NFLX) , and Alphabet Inc. (GOOGL) (formerly
Google) -- were among the hardest hit in recent days after significantly
contributing to gains this year. Those stocks have accounted for
two-fifths of the S&P 500's gains this year, said John Stoltzfus, chief
investment strategist at Oppenheimer. That's "reason enough we'd think
for some investors to take a little money off the table in the tech
space," he wrote in a note.
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A market correction will eventually come, but this selloff wasn't it,
argued James "Rev Shark" Deporre over on our premium site for investors,
Real Money. Get his insights with a free trial subscription.
Producer prices remained flat in May, according to the Bureau of Labor
Statistics, meeting analysts' expectations. Core producer prices, which
excludes food and energy, declined by 0.1% last month. Prices over the
last 12 months rose 2.4%, or 2.1% when excluding food and energy.
Crude oil production among the Organization of the Petroleum Exporting
Countries rose in May, the oil cartel said Tuesday. Overall OPEC
production increased 1%, driven by increases in output in Libya, Nigeria
and Iraq. The increases from Libya and Nigeria had been expected after
disruptions to operations at their oilfields in recent months. Iraq,
however, was a surprise. The country increased production by around
44,000 barrels to more than 4.4 million barrels a day.
Saudi Arabia will cut its oil exports to the U.S. in a continued effort
to reduce a global supply glut cramping prices, The Wall Street Journal
reported. State-owned Saudi Arabian Oil Co. will reduce U.S. exports to
about 1 million bpd in June, then 850,000 bpd in July. That's the lowest
level since 1988, according to EIA data.
West Texas Intermediate crude fell 0.8% to $45.70 a barrel on Tuesday.
Investors were also looking ahead to the Federal Reserve's two-day
meeting that begins Tuesday, June 13. Markets expect few surprises
there. An interest rate hike in June has been widely expected since Fed
commentary in recent weeks suggested there were more hawks than doves.
Members have pointed to a tightening job market, the risk of being
behind the curve on inflation, and a generally healthy economic recovery.
The Federal Open Market Committee, the monetary policy arm of the
central bank, will make an announcement on interest rates on Wednesday,
Wall Street is incredibly confident in a rate hike -- CME Group fed
funds futures have priced in a more than 99% chance of a 25-basis-point
increase. Should the Fed raise rates, it will be the second of three
expected hikes this year.
"We would think it's unlikely that the Fed would throw in a surprise to
the market and not move interest rates," Mark Heppenstall, chief
investment officer at Penn Mutual Asset Management, said in a phone
call. "I think there would be the potential for 'what do they know that
we don't know' type of mindset among investors if they weren't to
deliver on their tightening."
The Fed will also release updated economic growth and rate hike
forecasts, while Fed Chair Janet Yellen will hold a press conference
Cheesecake Factory Inc. (CAKE) fell almost 10% after lowering its
second-quarter forecasts. The restaurant chain anticipates
same-restaurant sales will decline by roughly 1% over its second
quarter, down from previous guidance for a 1% to 2% rise. CEO David
Overton said the company has experienced "volatility in the week-to-week
sales trends, indicative of uncertainty on the part of many consumers"
and "pockets of softness as we moved through the quarter."
Sears Holding Corp. (SHLD) fell 2% after announcing plans to cut 400
jobs. The strategic restructuring plans are designed to reduce annual
costs by $1.25 billion.
Verizon Communications Inc. (VZ) officially closed its deal to acquire
Yahoo! Inc.'s (YHOO) core Internet assets on Tuesday. The $4.48 billion
sees Yahoo! absorbed with Verizon's AOL to form a new media entity,
Oath. Yahoo! CEO Marissa Mayer has resigned from her position.