Daily Market Recap
After the retreat today the market has surrendered virtually all of its post FOMC bounce. The S&P 500 closed at 1433 and was near the same level when the big announcement came on September 13th. So, the market broke out and we are now retesting that breakout level.
The sell-off over the past week is the mirror image of the run over the prior two weeks. It has been a risk off environment for the last few sessions. Telecom and staples have been the best performers this week. Utilities were up slightly today after being a source of cash for buyers the prior two weeks. Semiconductor stocks were off sharply again today.
The last catalyst we had for the market was direct investment by European central bankers in their bond markets. As things have gotten tumultuous in some areas of the continent over the past few days there have been questions regarding the certainty of these plans. Finance ministers in Europe today voiced concerns over how some of these plans will work. These things never go smoothly and the recent retreat is, to this point, just a consolidation of recent gains.
Financials were a big beneficiary of the FOMC announcements. The sector was bid up aggressively after Bernanke’s last speech. Those names were clearly extended and have now come into technical support levels. We will see over the next few sessions if that support comes in.
Trading in Europe today was downright ugly. The Dow Jones Euro Stoxx index was off 2.7%. The index was up yesterday so the decline today came after very sharp gains. Stocks in Europe remain sharply higher on the quarter.
Industrials and transports were off today, they performed slightly better than the overall market. Homebuilders were off sharply on profit taking and some disappointment over new homes sales data. The number was roughly in line with expectations, but recent activity in the industry group made it clear people were expecting numbers to beat expectations.
Crude was off 1.5% and energy stocks were down roughly 1%. Coal stocks were up on short covering.
Over the next few days Spain will be in the spotlight as they release bank stress test information, 2013 budget forecasts and details of a potential reform package.
Source: PFS Group
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