Stocks fell Wednesday when the Federal Reserve gave little insight as to when it planned to raise interest rates. The large-cap indices were down fractionally, with the Dow off 0.1% and the S&P 500 off 0.2%. But the Nasdaq fell 0.6%, and the Russell 2000 lost 1.1%.
Despite the need to raise rates sooner rather than later, the minutes of the Federal Open Market Committee’s October policy meeting showed that many of the Fed governors are watching for a potential decline in inflation expectations. Rates have now been close to zero for almost six years, which has helped stocks but hurt those who depend on higher yields like the retired.
Although stocks are progressing higher, the S&P 500 has not closed up 1% any day so far in November. Decreased volume and narrow breadth have investors on edge since there appears to be little enthusiasm for the rally’s continuation.
Housing starts fell 2.8% in October versus an expected increase of 0.8%. Building permits rose more than expected last month, up 4.8% compared with estimates for a 0.6% gain.
Lowe’s Companies, Inc. (LOW) jumped 6.4% on better-than-expected earnings. And Target Corporation (TGT) rose 7.4% after reporting strong results that included a 1.2% increase in comparable store sales. The SPDR S&P Retail ETF (XRT) was up 0.7% for the day.
At Wednesday’s close, the Dow Jones Industrial Average fell 2 points to 17,686, the S&P 500 lost 3 points at 2,049, the Nasdaq dropped 27 points to 4,676, and the Russell 2000 was off 13 points at 1,158.
The NYSE’s primary market traded 737 million shares with total volume of 3.4 billion. The Nasdaq crossed 1.6 billion shares. On the Big Board, decliners outpaced advancers by 1.6-to-1, and on the Nasdaq, decliners were ahead by 2.5-to-1.
I reviewed the SPDR S&P MidCap 400 ETF (MDY) in the Daily Market Outlook earlier this week. Here, again, we see the triple-top at $262-$263.
Look for a pullback to at least the conjunction of the 50-day and 200-day moving averages at $252. But the overall formation is toppy, so I see an even greater decline as selling progresses.
Conclusion
Apparently, stock buyers were looking for interest rate guidance from the Fed. Any news would have been more welcome than what they received, since stocks almost always react unfavorably to uncertainty.
Currently, volume is low, but if the market breaks lower, a pickup in volume and acceleration downward is very likely. Stocks fall much faster than they rise. Don’t get caught in the crowd trying to exit. Leave now.
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.
This chart is threatening. The 50-day moving average is about to cross through the 200-day in a death cross. Volume is negative, MACD is close to a sell signal, and momentum is also a day or so away from a sell signal.
