More conflicting comments from Federal Reserve officials kept the markets in a state of uncertainty. Atlanta Fed President Dennis Lockhart said that tapering could begin in December, but was later quoted as saying “monetary policy overall should remain very accommodative for quite some time.” Dallas Fed President Richard Fisher said that “the easy-money policy can’t go on forever.”
It appears that the Fed is trying to prepare the market for a reduction of its $85 billion bond buying program. While the Fed district presidents talk it out publicly, the impact on the stock market has been a reduction in volume and volatility as investors await a decision that may not come until next year.
At Tuesday’s close, the Dow Jones Industrial Average fell 32 points to 15,751, the S&P 500 lost 4 points at 1,768, and the Nasdaq rose less than a point to 3,920. The NYSE traded 653 million shares and the Nasdaq crossed 440 million. On the Big Board, decliners outpaced advancers by 1.7-to-1, and on the Nasdaq, decliners were ahead by 1.2-to-1.
They say “a picture is worth a thousand words,” and this picture of the CBOE Volatility Index (VIX) shows almost no fear. But when it hangs around below 13, it also indicates that few investors are willing to step up and take risk.
That being said, with volume low and traders in charge, the potential for an explosive move is possible. But note the intraday spike in late October — even that big pop in the VIX failed to shake anyone except a few traders out of the market.
Like the S&P 500 and the Dow industrials, the NYSE Composite has traded in a very narrow range for several weeks. The market needs a compelling reason to move ahead.
Conclusion: All of the major indices are pointing up. But lethargy is dominating and the impression is that, with the exception of a few high-tech stocks, the market is failing to attract buyers.
Since most stocks are at all-time highs, there is no overhead pressure to sell. Perhaps a break above the S&P 500’s all-time high at 1,775 will bring in new buyers. But for now, like most investors, we find it difficult to justify making major commitments in the absence of bullish technical signals.
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
