Stocks are up on the session and the NASDAQ composite managed to tag a new 2009 high but markets are off their best levels of the day as investors wait for the FOMC decision. A decline in the U.S. dollar is fueling a bounce in commodities with crude oil up two days in a row (+3.1% today) and gold futures up $13 to $1,136.00 an ounce. Banks were up big in foreign markets leading the rebound. In the U.S. traders digested news on housing starts and the CPI data.
Asian markets were mixed. The Japanese NIKKEI rallied 0.9% to a new seven-week high on short covering in banks. The Chinese Shanghai index lost 0.59% and the Hong Kong Hang Seng fell 0.9%. The international Basel Committee on Banking Supervision announced that banks will have a grace period before global regulators apply stricter rules on capital requirements. This led to short covering in banks both in Asia and in Europe. European markets were able to rally across the board in spite of news that S&P had downgraded Greece's credit rating from AAA- to BBB+ and put the country on credit watch negative for further downgrades. The English FTSE rose 0.39%. The French CAC-40 climbed 0.8%. The German DAX gained 1.4%.
In the U.S. investors were digesting housing starts and CPI data. The Commerce Department said housing starts (construction of new homes) rose 8.9% in November to a seasonally adjusted pace of 574,000 units. All regions of the country saw improvement but overall the number was below economists' estimates. Meanwhile the Labor Department said the Consumer Price Index (CPI), a measure of inflation at the consumer level, rose 0.4% in November, up from 0.3% in October. Yet if you strip out the more volatile food and energy prices the "core" CPI inflation was unchanged (+0.0%), a feat that hasn't occurred in more than ten months. This is good news and helps alleviate some of the concerns we might have seen from the rising wholesale price data we got yesterday. Rising inflation would put pressure on the Federal Reserve to raise rates.
The FOMC will complete their two-day meeting today and their decision on interest rates will be announced around 2:15 p.m. eastern time. No one expects the Fed to raise rates at this meeting so the focus will be on their economic outlook and any comments that might suggest when they will raise rates in the future. The improvement in GDP, consumer spending, and improvement in the housing market are all positive signs that suggest the Fed is closer to raising rates but unemployment is still near 25-year highs and the huge drop in yesterday's NY Empire state economic index shows how fragile this rebound could be. Odds are the Fed will remain very accommodative.
Currently the S&P 500 index is up just over six points at 1,114 and trading near the top of its trading range. The NASDAQ composite has pulled back from its 2009 highs this morning but it's still up over 13 points at 2,214. The Dow Industrials are up almost 28 points near 10,479. The small cap Russell 2000 index is showing some relative strength with a 1.0% gain and a new relative high near 612. The semiconductor sector is showing relative strength with a 2.2% rally and a new 2009 high. Plus the transports are trading at new 2009 highs.
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
A quick scan of the OptionInvestor.com play list reveals that BUCY hit our target to take profits near $55 this morning. EQIX, INFY, UNH, UTX, and VRTX are hitting new highs.