Equities drifted lower on Thursday as traders and investors continued to rehash Wednesday’s Federal Reserve policy statement for clues as to what lies ahead. Expectations are zeroing in on September as being the most likely timing for the first interest rate hike since 2006 — with the pace of tightening likely to be extremely slow.
Currency market volatility eased somewhat after the U.S. dollar dumped after the cash close on Tuesday, reversing some of the post-Fed moves. A Reuters poll shows that 12 of 16 primary dealers expect the Fed to lift rates in September or later with just four expecting a liftoff in June (down from nine earlier this month).
In the end, the Dow Jones Industrial Average lost 0.6% and the S&P 500 lost 0.5%, while the Nasdaq Composite and the Russell 2000 both gained 0.2%.
The United States Oil Fund LP (ETF) (NYSEARCA:USO) lost 4.1% to return to pre-Fed levels, weighing on the energy sector, on lingering oversupply concerns. Apple Inc. (NASDAQ:AAPL) lost 0.8% in its first day trading as a Dow component.
Material stocks lost 1.7% as a group, leading the way down on big losses from names like Nucor Corporation (NYSE:NUE) and Freeport-McMoRan Inc (NYSE:FCX).
Bank stocks were also weak, with Bank of America Corp (NYSE:BAC) dropping 2.3% to fall out of a three-month pennant pattern — pushing up the Mar $16 puts recommended to Edge Pro subscribers.
Tesla Motors Inc (NASDAQ:TSLA) was in the news talking up new software releases, with auto steering and a “summon” feature getting hype. Also, the company is working hard to alleviate range anxiety by communicating with charging stations and warning when a driver is about to go out of range.
Technically, the market has gone into a strange stasis near all-time highs but made vulnerable by weak breadth and elevated market sentiment.
The next big catalyst could be the situation in Greece finally coming to a climax on chatter that Greek banks could be forced to enact capital controls as deposit flight accelerates. If no new bailout deal can be negotiated, Athens could run short of funds by the end of the month.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters.
