U.S. equities mostly finished lower on Thursday as the bulls cooled their heels after a multi-day push to new record highs. Hopes for a bipartisan deal on taxes dimmed slightly after President Donald Trump and Congressional Democrats differed on whether border wall funding would be part of the agreement.
In the end, the Dow Jones Industrial Average gained 0.2%, the S&P 500 lost 0.1%, the Nasdaq Composite lost 0.5% and the Russell 2000 lost 0.1%. Treasury bonds were largely unchanged, the dollar weakened, gold gained 0.1% and oil extended its recent rally gaining 1.2%.
Click to Enlarge Breadth was slightly positive with volume at 113% of the NYSE’s 30-day average. Utilities led the way with a 0.9% gain while consumer discretionary stocks were the laggards, down 0.5%.
ATV maker Polaris Industries (NYSE:PII) gained 4.3% after saying its July-August sales were up double digits year-over-year on strong promotional activity. Hertz (NYSE:HTZ) fell 12.4% after being downgraded to neutral at Morgan Stanley on valuation and industry concerns.
On the economic front, Consumer Price Inflation data beat estimates rising 0.4% from the month prior pushing the annual rate to 1.9%. Gasoline and shelter costs drove the gains with the latter rising at its quickest pace since October 2005. Societe Generale’s Omair Sharif believes the result is “exactly what Federal Reserve officials were hoping to see” as it should partially ease their concerns about a recent run of weak inflation readings dismissed as idiosyncratic (related to things like competition between cellphone providers).
As a reminder, the Federal Reserve will hold a policy meeting next Wednesday where they are widely expected to start the processes of pulling back their $4.4 trillion balance sheet via a “quantitative tightening” program.
Conclusion
Much of the action of the past 24 hours has been outside of stocks and outside of the United States. Bitcoin was crushed, down 14.3% today to $3,319, amid a deepening regulatory crackdown in China. Chinese economic data also missed estimates by the largest amount in six months.
But the focus will soon return with the Fed on track to start the process of reversing years of bond-buying stimulus and ultra-low rates. What’s the motivation? In a word, housing. Which, along with stocks, is looking increasingly bubbly in areas like my hometown of Seattle (all that Amazon.com, Inc. (NASDAQ:AMZN) money).
The futures market responded by pushing up the odds of a December Fed rate hike to better-than-even 51% odds (up from 41.3% on Wednesday). Higher interest rates are coming, it seems.
Check out Serge Berger’s Trade of the Day for Sept. 14!
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.
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Anthony Mirhaydari is the founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
