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The primary problems in the world–emerging markets, currency chaos and mixed economic data–weren’t addressed by the Fed Wednesday. It’s likely, while not admitting it, the Fed needs to reduce its $4 trillion balance sheet even if it seems premature to do so. We know QE & ZIRP has helped corporations buy back shares reducing float and earn executives more on their stock options. They’re not investing to grow their companies, only their stock price. Of course, any owner of appreciated shares have benefitted but so too executives with stock bonuses tied to ballooning stock prices.
So, maybe it’s time for a reality check.
The Fed’s ongoing taper didn’t help emerging market currencies which continued to fall in Brazil, Turkey, South Africa, Russia, and Australia. This continues even as these countries raise interest rates to protect their currencies.
Recent earnings were not what most investors expected as Yahoo (YHOO) tumbled 5%, Boeing (BA) stock fell 4%, Facebook (FB) was down 3%, and market-king Apple (AAPL) disappointed and the stock broke beneath $500 (briefly). Overall, good earnings reports were treated like yesterday’s news.
Meanwhile Citigroup’s (C) Head of Equities, Rick Bartlett, died last week. Further, the company has been hurt by their exposure to emerging market risk. The stock was down nearly 4%.
Leading sectors lower Wednesday included: Banks (KBE), Financials (XLF), Retail (XRT) Consumer Discretionary (XLY), Tech (QQQ), Small Caps (IWM), Consumer Staples (XLP), Value (IVE), Transportation (IYT), Emerging Markets (EEM), India (EPI), Brazil (EWZ), Russia (RSX), Turkey (TUR), Germany (EWG), and Solar (TAN). As far as Gainers go, you could count using just one hand. They included: Gold (GLD), Gold Miners (GDX); Natural Gas (UNG), Bonds (TLT), and the Yen (FXY).
In our Aggressive Growth portfolio we are short most major market sectors and in our Growth & Income portfolio we have on two hedges as of Monday morning.
Our staff also puts together the daily top 40 ETF market movers by percentage change in volume for gainers, decliners and emerging volume. This is a tool that investors can use to shorten their search for suitable ETFs, without being dominated by typical high volume issues or leveraged and/or inverse ETFs.
Volume was the highest in a long time as distribution continues. Breadth per the WSJ was negative once again putting us in short-term oversold condition again
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Thursday features more economic data including GDP, Jobless Claims and Pending Home Sales. Earnings reports includes: 3M, ADT, Amazon, Beazer Homes, Blackstone Group, Broadcom,Celgene, Cardinal Health, Chipolte Mexican Grill, Chubb, Eli Lilly, Google, Harley-Davidson, Hershey, Newmont Mining, Northrop Grumman, Occidental Petroleum, PMC-Sierra, Potash Pulte Group, Raytheon, State Street Bank, United Parcel Service and Viacom among others.
As a reminder, and not that you haven’t seen it first hand, market volatility is rapidly rising and conditions can change in an instant.
Let’s see what happens.
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