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Markets "ignore" Philly Fed report

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The major indexes are at their session highs and Treasuries have seen a reversal from buying to selling after today's 12:00 PM EST release of the April Philadelphia Fed Index, which fell to -8.8 and was slightly worse than the forecasted -8.0.

The markets response from both the stock and bond markets has to have trader's scratching their heads, but I will note that I've seen a "scattering" of estimates for the Philly Fed Index, which gives the look of a moving target estimate where estimates were all over the place. For example... Briefing.com had estimates at -3.8 yesterday, -8.0 this morning and -10 just hours later. Reuters poll of economists had their forecast of -4.9%.

While stocks looked to bid ahead of the report, once released, stocks jumped to their best levels of the session and currently show the Dow Industrials gaining 41 points at 8,300, the S&P 500 Index gaining 9 points at 890, the narrower S&P 100 Index rising 4.25 points to 451 and the tech-heavy NASDAQ-100 Index jumping 23 points to 1,078, which matches yesterday's highs.

Treasuries have seen a reversal from buying to selling, especially in the shorter dated 5-year June futures contract (fv03m) $112'280 -0.1% which falls 4/32, after having traded a session high of $113'065 earlier this morning. Following the shorter-dated 5-year had seller coming into the 10-year bond, with the June futures contract (ty03m) $114'070 -0.09% now off 4/32 and YIELD ($TNX.X) rising to 3.957%. The longer-dated 30- year bond still sees fractional selling with YIELD ($TYX.X)lower at 4.891%, which should have a flattening effect for the YIELD curve (bullish for equities).

A quick look at the June Fed Funds futures contract (ff03m) 98.81 (unch) shows little change, with the MARKET roughly predicting a less than 25% chance of a Fed cut at its June meeting.

Some comments coming from economists this morning is that a lot of the data being reported in weaker than forecasted April Philadelphia report is being ignored, because the bulk of it is pre-war data, and economists say they are thinking about the future economy that's going to be unshackled from the uncertainty of war as opposed to prewar data.

Sector action, which was broadly positive at the 11:00 AM EST mark, has been building further bullish with the Semiconductor Index (SOX.X) 331.88 +4.24% and Disk Drive Index (DDX.X) 81.59 +4.02% surging. Today's trade at 81.00 in the DDX triggers a triple-top buy signal as significant resistance is being broke. Shares of DDX component SanDisk (NASDAQ:SNDK) $21.64 +21.57% are today's key driver after "blowing away" analyst's estimates. The Semiconductor HOLDRS (AMEX:SMH) $26.45 +3.60% are benefiting from SNDK's trade, as this stock is a component of the SMH. A trade at $27 in the SMH would get this HOLRD back on a point and figure buy signal and this security begins to look further bullish at that level after a recent test of bullish support trend at $21 in early February.

Market internals at the 01:00 PM EST mark has the NYSE showing positive breadth at nearly 3 to 1, while NASDAQ breadth shows gainers outnumbering advancers by a 9 to 5 margin. 73 stocks on the NYSE have traded new 52-week highs compared to 16 stocks trading new 52-week lows. Meanwhile, the NASDAQ reports 67 stocks having traded a new 52-week high versus 21 stocks at new 52-week lows.

Jeff Bailey

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