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After The Close - The bulls stormed back to the U.S. equity market today, rebounding mightily from a soft Tuesday with wide gains registered on each of the three major indexes. The headline story, of course, was the Federal Reserve’s move to raise interest rates. The second augmentation in three meetings, Wednesday’s announcement underscores a consistently strengthening economy. The Dow Jones Industrial Average added over 100 points following the news, with 24 of 30 components finishing the session in the black. The S&P 500 and NASDAQ grew by 0.84% (20 points) and 0.74% (43 points), respectively.

The Fed’s decision to increase interest rates was telegraphed for weeks. A growingly optimistic economic outlook, driven especially by the improving labor market, all but guaranteed today’s decision. In fact, market prognosticators had the odds of a rate at nearly 100% leading up to the conclusion of the central bank’s meeting. Accordingly, the bullish market had already factored in the raise, and the averages rallied higher as traders processed the 2:00 PM EDT announcement. Looking forward, with bank Chair Janet Yellen stating that the economy is doing well, investors should now expect two more rate hikes in 2017, and three in the following year.

Meanwhile, U.S. crude oil broke its seven-day losing streak, rising 2.4% to $48.86 per-barrel. Domestic stockpiles fell by 237,000 last week, a welcome surprise to the anticipated 3.7 million barrel increase. Also helping to drive prices higher was the U.S. Energy Information Administration’s (IEA) belief that OPEC’s production cap will likely lead to a crude oil deficit in the first half of the year. The accord, the IEA reported, boasted a 98% compliance rate through February.

In all, it was a resounding win for the bulls. Each of the ten of the major market sectors boasted aggregate gains on the day, of which the basic materials, energy, and utility groupings were the biggest winners. Market breadth was boosted by a day-long rally in the mid- and small-cap equity markets, and contributed to a lopsided 7-to-1 edge held by advancing over declining stocks. With the indexes still trading below their all-time highs reached in early March, we believe the rally could last through the end of the week. As ever, stay tuned. – Robert Harrington

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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11:50 AM EDT - The middle day of the trading week is seeing the major equity averages attempt to retrace the prior-day’s losses. Stocks are getting a boost from a recovery in oil prices and some decent news on the U.S. economy (more below). That said, the moves, though on high volume, have likely been capped by some hesitation on the part of investors to make a big splash ahead of this afternoon’s monetary policy statement from the Federal Reserve.

As we approach the noon hour on the East Coast, the Dow is holding a gain of 50 points. The tech-heavy NASDAQ, despite a sluggish showing in the tech space, and the broader S&P 500 Index are producing similar percentage advances. The buying is broadbased, with advances in the small- and mid-cap sectors, as well, and plurality of winning issues on both the New York Stock Exchange and the NASDAQ, to the tune of more than three to one on the latter exchange. And, save for the technology group, all the major sectors are in positive territory, with the economically sensitive areas, most notably the energy and basic materials issues, providing the leadership.

The day’s notable headlines come from the business beat this morning. As noted, the market is getting a boost from a partial recovery in crude oil prices in both New York dealings and on the Continent. Oil prices had been on a slide over the last week over concerns of a growing supply of oil in the market, engendered by reports of a growing U.S. rig count and an uptick in production from Saudi Arabia. Meantime, the news from the housing market was very encouraging. Specifically, builder confidence in the market for newly-built single-family homes jumped six points to a level of 71 on the National Association of Home Builders/Wells Fargo Housing Market Index. This is the highest reading since June 2005, with the builders buoyed by President Trump’s actions on regulatory reform, particularly his recent executive order to rescind or revise the parameters of the rule that impacts securing permits. Conversely, the monthly reading on retail sales came in slightly below expectations, at a gain of 0.1%. On the positive, total retail sales for February were 5.7% above the prior-year figure.

An even bigger spotlight will be shed on the economy later today when the Federal Reserve concludes its two-day FOMC meeting and releases its monetary policy statement at 2:00 P.M. (EDT). The overwhelming consensus is that the lead bank will raise short-term interest rates by 25 basis points at that time, especially with the recent surge in nonfarm payrolls and the selective uptick in inflation. We don’t think the actually decision will have a huge impact on the market, but the tone with regard to future monetary activity could impact the market this afternoon. A more hawkish than expected posture could prompt some profit taking.

Looking ahead, all eyes will clearly be on the Federal Reserve’s remarks at 2:00 P.M. Those comments have the potential to be a game changer for the market. Thus, we don’t expect investors to make any significant moves over the next 60-plus minutes, but after the Fed statement all bets are off. Stay tuned. - William G. Ferguson

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

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Before The Bell - Beware the ides of March could well have been the theme of yesterday's stock market, as preparations for the 15th of this month were certainly anything but hospitable. That is because stocks faltered badly in the morning, with the Dow Jones Industrial Average losing some 95 points before noon in New York. Losses that were proportionately greater were suffered by the S&P 500, the NASDAQ, and the small-cap Russell 2000 Index. It was an unsettling way for the bulls to start the second session of the week.

Behind the early selloff were concerns about the Federal Reserve's two-day FOMC meeting, which will conclude this afternoon. Expectations are that the Fed will vote for a 25-basis-point hike in short-term borrowing costs. However, a worry is that the lead bank will opt for a more hawkish posture on future monetary policy. Thus the accompanying bank statement will be examined closely. The consensus view is that the Fed will increase rates three times this year, including today's presumptive hike. Anything more than that could upset the applecart on Wall Street.      

But the Fed is not all the Street is concerned with. There also are the extended valuations in the market. Further, oil prices are skidding, with a barrel of WTI falling below $48 in New York yesterday. Oil had been above $55 recently. Also of note is the increasingly fractious goings on in Washington, most notably on the subject of health care reform, with the contestants being largely opposing camps of Republicans. The current fear is that health care revisions cannot be worked, much of the President's program will be delayed, or worse.  

Thus, stocks wilted, with the losses covering not only the key averages, but individual sectors as well. True, as the afternoon moved into its mid-to-latter stages, the leading indexes did strive on several occasions to limit their losses. But the morning lows held. Meanwhile, the afternoon still found all 10 of the leading equity groups in the red, with the most pronounced losses coming, as before, in the basic materials, energy, and industrial groups. Losing stocks also were continuing to overwhelm winning equities, with the gap narrowing somewhat.  

This weaker pattern would continue into the latter stages of the session, with the losses narrowing a bit further in the major indexes, as the worries noted above persisted, but few market participants were ready to make a definitive statement ahead of the Fed decision. Meanwhile, in addition to the Fed and the in-fighting in Washington over potential legislation, the market also is suddenly worried about inflation, as the Labor Department reported a pickup (to 0.3%) in producer or wholesale inflation.  

The yearly increase in the Producer Price Index (2.2%) likewise was greater than forecast and also could lead to the Fed becoming more aggressive going forward. So, that was where we were in late afternoon ahead of the central bank monetary decision. Things changed little into the close, so as the final bell sounded, the Dow was still off by just over 44 points; the S&P 500 was lower by eight points; and the NASDAQ was down by 19 points. Also, weakness continued to be spread out across most groups and a large majority of individual issues.

Peering out on a new day, and as we look to this afternoon's FOMC conclusion, we see that stock prices were mostly lower in Asia overnight, while traders are now pushing most of the bourses higher in Europe so far this morning. And on our shores, the early action in the futures is positive. As to other potential influences on equity trading, oil prices are recovering about 2%; bond yields are lower; and the mood in Washington is still sour. But the main focus today figures to be the Fed and the pending rate decision, which is now just hours away.   - Harvey S. Katz 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.