Fed Minutes Indicate a Shift in Attitude towards Tapering

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Commentary

  • Summary Analysis: The risk-off trade is dominating investor sentiment. This is clearly evident is cryptocurrencies, which are undergoing a savage correction. Meanwhile, the US Central Bank, aka the Fed Reserve, is beginning to pivot from its accomodative monetary policy. The latest minutes show some of its members are more open to discussing the tapering of asset purchases. The implication of such is bearish for stocks. 10-Year Treasury rates responded with a new 4-day high. However, being true to its nature as economists, the Fed did offer the market a view on the other hand whereby St. Louis President Bullard mentioned the possibility of an upward revision to 2021 GDP, which is bullish for stocks. Although the VIX (VXX) gapped up on significanlty higher volume, it closed at the lower end of its daily range and could be signalling a temporary respite from the recent selling pressure in the equity markets.
  • Equities:
    • US Markets: SP-500 (SPY) and Dow 30 Industrials (DIA) are consolidating, with the latter making a new 5-week low. The Nasdaq-100 (QQQ) was the only index to close higher and finish at its upper trading range. Overall, the increased volume for all 4 major indexes is a positive despite their lackluster performance as buyers appear more interested at these price levels.
    • International: Strength (relatively speaking) in China (FXI) and Emerging Markets (EEM); and weakness in Latin America 40 (ILF) and Brazil (EWZ).
    • ETF Sectors: Strength in Technology (XLK) and Communications (XLC); weakness in Energy (XLE) and Basic Materials (XLB).
  • Large-Cap Volume Surgers:
    • Target (TGT): +6.09% on 317% volume surge
    • TJX Companies (TJX): -5.29% on 188% volume surge
    • Progressive Corp (PGR): -4.70% on 123% volume surge
    • Analog Devices (ADI): +4.96% on 113% volume surge
    • Salesforce (CRM): +3.27% on 49% volume surge
  • Small-Cap Volume Surgers:
    • Alcoa Corp (AA): -9.21% on 121% volume surge
    • Sunnova Energy Int’l Inc (NOVA): +5.05% on 64% volume surge
    • PBF Energy Inc (PBF): -6.41% on 50% volume surge
  • Market Moving Events:
    • Commodities / Energy: Weekly EIA Petroleum Status report indicated Crude Oil Inventories @ 1.321mm vs estimates @ 1.623mm and prior @ -0.427mm.
    • Central Banks / US: The Fed released minutes from its Apr 27-28 FOMC meeting and revealed that some of its members are open to debating the tapering of asset purchases and have “suggested that if the economy continued to make rapid progress toward the FOMC’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases.”
    • Economy / Fed Outlook: St. Louis Fed President Bullard noted the U.S. has a “big economic boom going on” and thinks that 2021 GDP estimates could be raised to 6.5%.
    • Earnings / Positive Surprises: ADI; LOW; TJX; and TGT.
    • Earnings / Negative Surprises: n/a.

ETF Daily Market Performance Summary: 19-May-2021

etf daily market summary for stocks, bonds, currencies, cryptocurrencies, commodities, real estate, and equity sectors
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Market Diary: 19-May-2021

market diary summary for NYSE and Nasdaq exchanges: advancers, decliners, new highs and new lows, plus mega-cap market breadth
(Click table to enlarge)

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