Feds up rates by 25 basis points. Market rockets 217

5.25% is the result of 17 consecutive interest rate hikes by the Feds. While the market may see this rate as high given the current outlook and state of the economy, the Dow finished up 217.24 points to close at 11,191.80 and nasdaq gained 63 to close at 2,174. The reason we saw an upswing was that the Feds indicated that they will be dependent upon economic data that will be coming out between now and the next Fed meeting in August to determine if the rates should continue thier north-bound course. This suggests a pause might be in the works over at the Fed building. Fed funds futures dropped after the report was given at 2:15pm today from around 80-95% to less than 65%.

This might be the signal that we have seen a bottom in the market for a while, but more importantly, it means that all economic data from now until August is going to be very important and move the markets as traders try to figure out what the Feds will do in the future.

New Home sales up

A 4.6 percent increase in sales pushed the sales rate to the highest level since last December and followed increases of 5.9 percent in April and 7.3 percent in March. Economist were expecting the number to show a housing market slow down.

Da Bears!

Wall Street finished lower today, and for the week, as durable good orders came in at a decline of .3%, lower than the .4% rise that analysts were expecting. This marks the second straight month of declines, with last month showing a sharp 4.7% fall due mostly to airplane orders. The decreases in durable goods has traders worried that there is going to be an economic slowdown soon due to the increases in the interest rates by the Fed. Speaking of the Fed, the FOMC meeting is this coming Wednesday and Thursday. We will likely see low volume and very low volatility until the Fed announces their decision on Thursday.

It seems that the only hope for a half-way-decent summer rests squarely on corporate earnings. If they come in strong, traders might get bullish enough to shrug off the rate hikes as the economy shows it can weather the harsh lending environment. On the other side, if earnings come in much weaker than expected, we could see a positive response because the Fed might see that as a sign that they do not need to raise rates anymore. Of course, if the corporate earnings are as bad as they would have to be to get the Feds to stop, I personally don't think we will be going up in the market for any reason.

Big news with the energy sector, Anadarko Petroleum Corp. announced that it intends to acquire two rivals, Kerr-McGee Corp. and Western Gas Resources Inc. for a total of $2.1 billion. Both of the companies being bought jumped over $18 each pre-market when the buy out was announced. Other energy stocks also saw a significant uptick due to speculation about further consolidation in the industry.

the weakness continues

The market is seeing yet another day of stocks being thrown in the discount bin as traders react negatively to a greater-than-forecast drop in the Conference Board's index of leading indicators. Jobless data came in showing the expected softening in the job market as well. The Dow is currently down 80 points with the S&P down almost 9 points, both are down around .7% currently.

Triple digit gains yesterday

Great day for the market yesterday, buying on most fronts pushed the Dow into triple digit gains, a good sign for the economy as the Dow is once again above 11,000. Yesterday really saw an all day upward trend, not just random buying pushing the market up. This is a good sign for the market as upward trends gain more momentum than just the 'lack of selling' moves we have seen in the past.

The earnings from Morgan and FedEx really put some fire under traders today to turn a weak start into a strong day. Oil inventories came in off estimates, there was more oil gas and distillates used then expected, causing the oil market to strengthen. The overall market, which usually sells off when oil prices go up, matched the oil upticks.

Futures are currently pointing up this morning as optimistic traders prepare for another day on the street. Hopefully we will see the same strength today that we saw yesterday.

The Market is looking flat

Futures are flat to slightly negative, Morgan came out with positive earnings, Fed Ex did the same, but neither seem to be pushing the markets in a positive direction this morning. The theory on the street is that these positive earnings might be signaling the fed that more rate hikes is needed in order to slow the economy down. The feds first job is to fight inflation, second job is to not cause a recession or even a depression, so in other words, if the fed has to push us into another horrible economic slump in order to kill inflation, they will do it on purpose. This is why the market fears the fed so much at this point.

It looks like a slow day, low volatility and not much action. We have oil inventories at 10:30am which might, if drastically off expectations, cause the market to pick a direction and cause volatility and volume to spike.

Housing starts beat, aimless trading reigns

The market has steadied itself after yesterdays losses in a morning of aimless trading. It seems consolidation is the current game plan with no clear direction being indicated for the day.

The Commerce Department reported that builders started construction at a seasonally adjusted annual rate of 1.957 million units last month, an increase of 5 percent from the April construction pace. The better-than-expected increase came after declines of 5.5 percent in April, 7.5 percent in March and 5.9 percent in February.

Continued political tension over Iran's nuclear arms program lifted oil prices following yesterday's dive. A barrel of light crude added 52 cents to $69.50 on the NYME.

Start the Week

Looks like futures are trading up this morning after positive numbers from the Circuit City earnings report. Bear Sterns also saw an upgrade this morning which might help the brokers show some much needed strength.

With little economic data coming out this week, we are going to start looking towards the earnings coming up in the next few weeks to point us in the right direction. It seems the market has fully priced in the Fed rate hike that we will probably see at the end of the month. We should see a good start to the week this morning, lets just hope we stay on that positive note.

Fedspeak - the market doesn't care

"The cumulative increases in energy and commodity prices have been large enough that they could account for some of the recent pickup in core inflation," Bernanke said. "The days of persistently cheap oil and natural gas are likely behind us," Bernanke said. "Even though oil prices have risen quite significantly, they haven't had nearly the effect on overall inflation and therefore there's not nearly the response in terms of interest rates that we saw in the 1970s," he said. "This illustrates the importance of keeping expectations of inflation contained, and keeping the credibility of the Federal Reserve strong."
Bernanke is worried that the expectations of inflation will cause Americans and companies to alter their behavior and spending habits and create a self-fulfilling prophesy. Fears of stagflation, raising costs and slowing economic conditions, are also on some economists minds as we head into the next series of rate hikes. If the Fed over does the rate increase, we could be looking at a recession as well as high energy prices and inflation. This stagflation scenario is unlikely though.

The Dow has had 2 straight days of decently large gains to come back to this major support/resistance level. If we can make it above and hold above the 11,000 mark, we might be in good shape for the coming week. It seems that the market is fed up with Ben and his nonsense. Hopefully we will see some direction in the market in the next coming days. We should see some movement either to the upside or downside in 3-6 days or so. I expect we will be consolidating at this new level for a bit until everyone decides on a direction.

Also, on a side note, we have a Quadruple Witching day today. This is a day on which contracts for stock index futures, stock index options stock options and single stock futures (SSF) all expire. This will cause a spike in volume in the market, and hopefully some extra volatility

Yesterdays CPI data

The CPI that came out yesterday came in slightly higher then expected. This would normally be a bearish indicator that inflation is picking up. Especially now with the fed closely watching the data as it comes in order to make a rate hike decision at the end of this month. The markets are now expecting almost 100% that Ben will raise rates.

There has been some speculation as to why the markets were positive yesterday after this data. Many, including myself, believe that the markets are just to over-sold to sell anymore at this point. It looks like we might have finally finished pricing in the rate hike that is to come. With the jobless claims that came out this morning lower then expected, we could see a bounce today as traders look at this data as an indication that the fed might pause on raising rates after this June rate hike decision.

Core Inflation, Retails Sales up

Wholesale inflation rose by just .2% last month, lower than the .4% that the market was expecting. Core rate of inflation, which excludes energy and food, was higher than the expected .2%, coming in at up .3%.

Retail sales came in at up .1%, without autos, retail sales would have been .4% with most of it coming froma jump in retail gas prices.

Slowing with the rest of the economy, factory production will likely slow in the coming months due to a higher business inventories number which came in at .4%.

The Squawk Box poll of the day

Which do you think is the bigger threat to the economy in the second half?

1. Hurricanes
2. Iran
3. Bird Flu
4. Bernake


Currently, Bernake is in the lead with 65% of the votes.

I find this pretty funny.

Here is the link if you want to vote

Fears of higher interest rates and slowing economic growth keeps investors on edge

Investors have been reluctant to buy due to the Fed saying that more rate hikes may be needed to curb inflation. The Fed is still worried about high energy and commodity prices causing general inflation of everyday goods and services. There is a lot of fed speak this week, hopefully we will get some direction from the fed and that direction will be bullish.

an exhausted market

This week has taken a toll on the markets. Volatility has been high with the markets making large intra-day swings, yesterday saw a 200 point swing to finish barely positive, today has seen less volatility than recent days with only a range of about 95 points for the Dow. Going into the final trading hour of the week, the Dow is clinging to yesterdays close of 10,938.


Commodities
Oil closed at 71.68
gas is at 2.1475
natural gas is at 6.17
gold is at 612.8



The market ended the worst week in 14 months with the dow closing at 10,887.27 on Friday, June 9th, 2006.

Fire and Brimstone

The market has taken a beating ladies and gentlemen.. Absolutely been demolished in the past few days. Since the high less then 1 month ago, the dow has made a 909 point swing! Today we were down 170 points going into the lunch hour. Heavy volume picked up the markets and brough them back positive for the day, thankfully. We don't want to see the Dow drop like it has been. When that happens, people lose jobs, tax revenue falls for the government, spending decreases, savings increases and the economy grinds to a turtle pace. Recessions are bad.


Dow closed at 10,938.82 7.92 (0.07%)
Nasdaq closed at 2,145.32 6.48 (0.30%)
S&P 500 closed at 1,257.93 1.78 (0.14%)

Lets hope tomorrow brings a brighter picture for the market and ends the week on a more positive note.

More downward pressure

The market extended its losses today, continuing the sell off caused by Berstanke's comments from yesterday. The Dow dropped below 11,000 but seems to be holding above 10,940. Oil is down as well as coal, steel and other commodities.

The VIX (CBOE SP 500 Volatility Index) is currently up 6.13% to 17.67 as the dow tries to decide which way it wants to go.

Thanks again Berstanke.. we might be looking at a 400 point loss in the past 2 days

Fed chief destroys the market

Again, Ben came out with some statements that sent the market downward. Fed funds futures were pricing in a 50% chance of a rate hike, after Bernanke spoke, it spiked to as high as a 75% probability. Thanks to Ben, we see yet another 200 point down day for the Dow. With little data coming out over the next few days, it will be the technical traders holding the market up in front of the 11,000 support that has developed in the Dow Industrials.

ISM release

ISM data came in at 60.1, showing some weakness compared to last months 63 but is still showing a strong environment for the economy. Traders are worried that this might spark the fed to continue raising rates. No big numbers are scheduled for release for the rest of this week.

The Dow Industrial is losing ground again today, the lack of positive news coupled with traders fearing the fed will continue with rate increases is giving no reason to buy. Steel is having a rough day as well, the STQ, Steel Producers Index, is currently down 10.5 points.

The Markets current state

The Dow took a turn for the worse in the past few weeks, falling from near all time historical highs to a support level around 11,000. The market is half expecting the Fed to pause rates, according to the feds futures which are now pricing in a 50% chance of a pause in rate hikes. If the Fed pauses, we will probably see a return to historical highs for the Dow within a few days of the announcement.

In order for this to happen, we will need to see a continued weakness in commodities such as gold and copper. Energy prices will need to stabalize as well in order to ease concerns about inflation.

Stocks

Trading Stocks, not quite as terminal as trading futures, but it sure feels like it at times.