Fed and Economic Data Driving Markets

Markets are heading higher as the GDP data was better than expected for Q2 gaining 1.7% versus 1% expected. That has provided some optimism for the second half of the year as investors add money on the confirmed outlook. The Fed is speaking today at 2 pm and while they are not going to change anything relative to Fed policy many are hoping for some clarity on stimulus, and when the withdrawal of the $85 billion per month will begin. If there isn’t much help in terms of guidance from the Fed the markets may react on the sell side. That is all speculation, but we will know soon enough what investors want and believe relative to stimulus looking forward.

The key broad index today has been the NASDAQ which is currently up 0.5%, but has cleared the previous high of 3612. The xphNASDAQ 100 index is also moving higher and above 3085. If we hold the move higher it will be a positive for the broad markets looking forward. The technology stocks have been a laggard following earnings in may of the large cap stocks. If tech can find it’s footing the upside for the index will continue. Watch the SOX index for clues on tech.

The chart of the day goes to the pharmaceuticals (XPH) up 1.6% as earnings continue to drive the sector higher. QCOR is up 29% on the day, breaking from a six week consolidation range to lead the sector. The sector has been consolidating near the highs for the last three weeks and cleared $75.50 today to set a new high. The broader index (XLV) is hitting a new high as well. The leadership is important for the S&P 500 index to continue the trek higher.

Treasury bond yields have moved above the 3.68% resistance and pushing higher… this is not helping the interest sensitive sectors again today. The REITs (IYR) are down 1.8%, utilities are down 0.5% and Telecom is off 0.7%. This is something to watch as it impacts the consumer relative to purchases. If the downside in these sectors continue there will eventually be some opportunities, but attempting to catch a falling knife isn’t exactly the best plan short term. Add them to a watch list and let the opportunity develop.

Overall it is still a challenge for investors attempting to get into stocks at these levels. If we push through resistance look for more buyers to step into stocks. Plenty to consider going forward, but remember the trend is your friend and manage your downside risk.