Fed shows little in terms of changes near term

Yeah for Yellen, or is that thanks for Yellen? Whatever the case she put the market at ease on the interest rate issue for now and a rally pursued following the FOMC meeting. The S&P 500 hit a new high intraday, but failed to hold it closing at 2001 up 2 points for the day. As we stated last night there are issue surrounding this that will remain a question mark, but we did not expect much, if any, change in the Fed outlook. That is what transpired, little in terms of change, and now the jury is out on how the markets will react moving forward. Tomorrow promises to be interesting and we will take in  one day at a time as always.

To recap the list from last night with the meeting behind us let’s look at our seven points…

1)  The energy sector saw oil retreat to $94 per barrel and the stocks fell 0.5% on the day. The bounce remains in play on the day, but I am still not a big fan of the sector near term. A bounce off the lows would be expected, but the outlook for demand would need to increase if we are to reverse the current downtrend in play.

2)  Biotech was up 0.8% on the day holding the move off support tested on Monday. Bounce is still in play and the 278 level would be the initial goal, but a move beyond that would be the test of conviction towards the sector going forward. The growth leadership represented by this sector is still a big question mark despite the bounce the last two days. Growth stocks as a sector are under pressure as the Fed shifts focus towards raising rates versus holding them steady. I like the outlook for the next few weeks, but visibility beyond that is still too cloudy to call.

3)  The S&P 500 index as we stated above managed to hold the bounce from Tuesday and closed slightly higher on the day. Today only six of the ten sectors closed in the green. Energy, consumer services, utilities and consumer staples all close lower. Materials, telecom, financials and industrials were the leaders, technology and healthcare were essentially flat on the day. No big changes as the trading landscape shifts to digest the comments and outlook from the Fed.

4)  The NASDAQ was up on 0.2% on the day and failed to hold the upside move following the meeting and stayed mid-range of the current trading range near the highs. Not the most convincing move for the index and tomorrow will shed more light on any upside follow through going forward. Still showing signs of wanting to move lower.

5)  Treasury yields were lower early as investors believed the worst was over relative to the Fed. A spike to 3.39% following the meeting settled at the 3.36% mark on the thirty-year bond. I still like the sell side of the bonds looking forward with the Fed in position to raise rates short term.

6)  Technology stayed in the range established over the last four weeks. Like the other growth sectors some weakness showed on the day and leaves questions relative to the upside looking forward. Semiconductors were the best of the sub-sectors helping keep the broad sector in the green for the day. Jury is still out on the upside outlook.

7)  Small Caps (IWM) attempted to move above the $115 mark on the day, but failed to hold the move. Again the growth stocks not showing much in terms of conviction. Watch to see if the upside regains any momentum or the downside is the direction of choice? Patience is the key.

Overall not a bad day, but not a follow through day either. The mood shifted gradually back to where we were last Friday. Not optimistic, but not pessimistic. Patience remains the driving theme as the volatility index fell back to complacent zone and we watch to see how stocks play out going forward.