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Profit from the Pros By Kevin Matras Executive Vice President
Stocks End Lower, Fed Minutes Show Rate Hikes To Continue
Stocks closed lower yesterday, capping the Dow's winning streak at 5 days in a row.
But the major indexes are all within striking distance to keep their weekly winning streak going.
Target's weaker than expected earnings report yesterday (they posted a -45% negative EPS surprise, and an -89% drop in quarterly earnings vs. this time last year), weighed on stocks, especially after Walmart's 10% positive EPS surprise the day before. For the record, Target's same store sales were up 3%, and they sounded upbeat for the future, now that they cleared out their deeply discounted excess inventory. And, like Walmart, they too reaffirmed their guidance.
Yesterday's Retail Sales report came in better than expected, once you exclude gas. The headline number was flat at 0.0% m/m vs. the consensus for 0.1%. But ex-Vehicles, it was up 0.4% vs. views for -0.1%. And ex-Vehicles and Gas, it was up 0.7% vs. estimates for 0.3%. (Falling gasoline prices weighed on receipts.)
MBA Mortgage Applications fell -2.3% w/w with purchases off by -0.8% and refi's down by -5.4%.
Business Inventories came in as expected with a gain of 1.4% m/m. And last month's report was upwardly revised from a gain of 1.4% to 1.6%.
Yesterday's FOMC Minutes didn't pack too many surprises. It showed the Fed discussing the possibility that rising interest rates "would have a larger negative effect on economic activity than anticipated." But it also showed their commitment to tackling inflation, and that rates will continue to go up until they are sufficiently restrictive. And stay that way for some time to make sure the committee's objectives were achieved (which they have said is to get inflation heading back toward 2%).
At their last meeting, the Fed hinted at getting the Fed Funds rate to between 3-3.5% (it's at a mid-point of 2.38% now).
At the moment, the odds are at 38.5% that the Fed raises rates 75 basis points at their September 20-21 meeting, and 61.5% that they raise rates by 50 basis points.
We shall see.
In the meantime, we've got lots of economic reports to get thru, starting with today's Weekly Jobless Claims, Existing Home Sales, the Philadelphia Fed Manufacturing Index, and the Leading Indicators report.
We'll also get more earnings with another 139 companies on deck to report (249 in total for the rest of the week).
Stocks have been on a tear ever since the lows were made in mid-June. The Nasdaq and Russell 2000 have already exited their bear market and begun a new bull. And the S&P is only a few percent away from doing the same.
I'm sure plenty of investors are kicking themselves for getting out at the lows, or not getting sufficiently long when stocks were at their worst.
But there are easy solutions for not getting out at the lows in the future, and not worrying about missing critical buy points. And you don't have to turn yourself into a market timer either. To learn these steps, be sure to read our latest commentary...
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