U.S. markets closed mostly lower on Wednesday after setting another round of fresh all-time intraday highs on signs of a possible breakthrough in deadlocked stimulus talks with chatter of a “skinny” $500 billion fiscal package possibly in the works.
The afternoon minutes from the Federal Reserve July policy meeting weighed on sentiment after it showed Fed members cut their economic growth forecast for the remainder of 2020.
The Nasdaq had its 2-session winning streak snapped after giving back 0.6% with the intraday all-time reaching 11,257. The fade to 11,132 afterwards easily held current and upper support at 11,100-11,000. A close below the latter would signal a possible near-term top with additional weakness towards 10,900-10,800.
The S&P 500 was lower by 0.4% despite tagging a fresh record high of 3,399 ahead of the Fed news. The pullback to 3,369 afterwards breached and failed to hold upper support at 3,375-3,350. A move below the latter would signaling a further backtest towards 3,325-3,300.
The Dow extended its losing streak to 3-straight sessions after sliding 0.3% with the late day low reaching 27,647. Near-term and upper support at 27,750-27,650 failed to hold. A close below the latter would signal a further retest towards 27,600-27,500.
The Russell 2000 bucked the trend after edging up 0.2% with the midday high tapping 1,585. Current and lower resistance at 1,585-1,600 was breached but held. A close above the latter would be a bullish signal for additional strength towards 1,610-1,625.
Real Estate was the weakest sector after tanking 2.1% while Energy and Consumer Staples were lower 1.2% and 0.8%, respectively. There was no sector strength.
European markets closed mostly higher on hopes of a shorter quarantine period for travelers.
France’s CAC 40 rallied 0.8% while the Stoxx 600 and Germany’s DAX 30 rose 0.7%. UK’s FTSE 100 was up 0.6%. The Belgium20 was down 0.5%.
Asian markets were mixed for the 3rd-straight session after White House Chief of Staff Mark Meadows said no new high-level talks, related to the trade agreement, have been scheduled between the United States and China.
Australia’s S&P/ASX 200 rose 0.7% and South Korea’s Kospi climbed 0.5%. Japan’s Nikkei added 0.3%. China’s Shanghai tumbled 1.2% and Hong Kong’s Hang Seng lost 0.7%.
MBA Mortgage Applications fell -3.3% versus the prior week’s 6.8% bounce. The weakness was a function of refis, which dropped -5.3%, nearly halving the 9.1% gain in early August. The purchase index edged up 0.8% after a 2% gain previously. The 12-month pace on the applications index slowed to 34.2% year-over-year from 37.1%, with the refi index at 38.3% versus 46.7%. The purchase index edged up slightly to a 38.3% pace from 21.8%. Refis were hurt by a rise in the 30-year mortgage rate to 3.13% from the record low 3.06% previously. The market was also hurt by FNMA’s adoption of an adverse market fee that will be applied to what GSEs have to pay up front to acquire a loan, and that fee is likely to be passed on to borrowers. Meanwhile, the 5-year ARM fell to 2.95% from 3%.
Quarter Services Survey figures that track activity for the service sector revealed a -9.2% Q2 year-over-year drop in the aggregate “selected services” measure that reflected an -8.9% drop from Q1.
Minutes from the last Federal Reserve meeting stated that the path of the economy would depend significantly on the course of the coronavirus. In addition, members agreed that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term. In light of these developments, the Fed decided to maintain the target range for the federal funds rate at 0%-0.25%. The Fed is expected to maintain this target range until they are confident that the economy had weathered recent events and was on track to achieve maximum employment and price stability goals.
The minutes also stated that in contrast to the sizable rebound in consumer spending, participants saw less improvement in the business sector in recent months, and they noted that their District business contacts continued to report extraordinarily high levels of uncertainty and risks. Several Fed members relayed examples of some operational difficulties their business contacts were reportedly facing in the current environment. These difficulties included managing disruptions in supply chains, challenges associated with closure and reopening, and elevated employee absenteeism in some cases. Furthermore, some members noted that small businesses were under significant strain and further near-term fiscal support was uncertain.
The iShares 20+ Year Treasury Bond ETF (TLT) had its 2-session winning streak snapped despite trading to a morning high of $165.61. Current and lower resistance at $165.50-$166 was cleared but held. A close above the latter and the 50-day moving average would confirm a possible near-term bottom with additional hurdles at $167-$167.50.
Upper support at $163.50-$163 was breached but held on the drop to $163.30 afterwards. A close below the $162.50 level would be a renewed bearish signal with additional weakness towards $161.50-$161 and levels from mid-June.
The S&P 500 Volatility Index ($VIX) was up for the 2nd-straight session with the 2nd-half peak reaching 22.98. Current and lower resistance 22.50-23 failed to hold with wiggle room up to 24.50-25 on a close above the latter.
Support remains at 21.50-21 with the intraday low tagging 20.99. A close below the 20 level and the monthly low at 20.28 would be a more bullish signal for the market.
The Spider S&P 500 ETF (SPY) had its 3-session winning streak snapped despite testing an intraday and all-time high of $339.61. Uncharted territory and lower resistance at $339.50-$340 was cleared but held. A close above the latter would indicate additional strength towards the $341-$341.50 area.
Current support at $337-$336.50 was breached but held on the tumble to $336.62 ahead of the closing bell. A close below the latter would suggest additional weakness towards the $335.50-$335 area.
RSI is back in a slight downtrend after failing to hold key resistance at 70. Continued closes above this level would indicate additional strength towards 75 and the early June overbought peak. Support is at 65-60.
The Consumer Discretionary Select Spiders (XLY) was down for the 1st time in 3 sessions despite trading to a morning and fresh all-time high of $146.95. New and lower resistance at $146.50-$147 was breached but held. A move above the latter would suggest additional momentum towards $148.50-$149.
Current and upper support at $145.50-$145 was tripped but held on the late day backtest to $145.44. A close below the latter would reopen downside risk towards $143.50-$143.
RSI is rolling over after failing to clear and hold overbought resistance at 80. A close above this level would suggest additional strength towards 85-90 and levels from January 2018. Support is at 75-70.