BZ: Markets Struggle to Find Positive Ground; Fed Minutes May Move Them
Nasdaq 6,000? Wall Street appears to love big round numbers and with the markets demonstrating rally mode in recent sessions, some analysts are now looking for what was once the tech-heavy Nasdaq Composite to mark a milestone of its own.
But like Dow 20,000, this is just a number. It has no special meaning to speak of and shouldnâ€™t push investors one way or another. So why talk about it? Because Wall Street likes to talk about big round numbers and you will hear about it elsewhere. Just donâ€™t let it influence your trading and long-term investing, which we will remind you is a marathon, not a sprint.
In the early going, Nasdaq was flat after hitting yesterdayâ€™s 19th record of the year. Ditto for the S&P 500 (SPX), which notched its 10th fresh peak of the year with all 11 sectors turning higher, while the Dow Jones Industrials (DJIA) scored its eighth record of the year. Will they do it again today? It looked like they might struggle to stay in the green throughout the day but the minutes of the Federal Reserveâ€™s interest-rate meeting last month come out this afternoon and might make a difference. (See below.) So, too, might existing home sales for January, which come out later this morning.
Remember, too, that these are records of the year, not the last 52 weeks, but since the beginning of January, seven short weeks ago. What does history tell us about market swoons like this, particularly during February, which isnâ€™t typically a stellar month in the markets? Itâ€™s that the â€śequities follow a dance routineâ€ť of sorts during recoveries from declines, according to Sam Stovall, chief investment strategist at CFRA.
â€śIn the 27 years since 1945 that the S&P 500 rose in January and February, the S&P 500 recorded a positive full-year total return 27 times, averaging a gain of 24%,â€ť he said in a recent research report. â€śAlso, it was up in the remaining 10 months 25 of 27 times.
â€śFebruary is the second worst month of the year, typically enduring a digestion of gains recorded from October through January,â€ť he added. â€śBut like an octogenarian who is willing to forego his cherished afternoon nap for fear of missing out on something good, so, too, the marketâ€™s performance in the first two months of the year may offer a clue that investors believe that good things still lie ahead.â€ť
Or not. Remember that past performance is no guarantee of future results.
Meanwhile, the dollar is on a run of its own, with the ICE U.S. Dollar Index (/DX), a measure of the U.S. dollar against a basket of six rivals, rising to its highest closing level in five weeks. Today, in the early going, it was edging higher again against the euro but slipping against the yen.
The 10-year Treasury is struggling to stay higher, too, after rising as much as 4 basis points intraday yesterday to 2.46%. Early on, it stood at 2.40.
Mortgage Applications Slide
We keep hearing about the high demand for housing, but that apparently isnâ€™t showing up in mortgage applications. The Mortgage Bankers Association reports that seasonally adjusted mortgage application volume slipped 2% for the week ending Feb. 17 compared with the prior week.
Refinancing demand appeared to be the culprit as it fell 1% to 46.2% of total applications, its lowest level since November 2008. The adjustable-rate mortgage share of activity decreased to 7.3% of total applications.
Is it because of higher rates? The 30-year fixed rate on jumbo loans edged up to 4.29% from 4.28% and the 15-year fixed moved to 3.56% from 3.55%. On the flip side, the average contract interest rate for 5/1 adjustable-rate mortgages fell to 3.31% from 3.34%.
Reading the Fed Tea Leaves
That would be the minutes of the Feb. 1 Federal Open Market Committeeâ€™s meeting, which come out this afternoon. Remember the FOMC decided to keep interest rates intact then, and todayâ€™s report is expected to give us some insight into what the thinking was behind that. A surprise, say, that the minutes will have a decidedly dovish or hawkish tone, might jolt the markets.
When the decision was announced, the Fed talked of low wage data as part of the reason why it didnâ€™t raise interest rates. But then Fed Chairman Janet Yellen testified to Congress, noting that March was still a â€śliveâ€ť meeting, meaning that hikes were still on the table. And there have been other hawkish comments since about a possible March rate increase.
The markets donâ€™t appear to believe that, according to the CME Groupâ€™s FedWatch tool, which today predicts only a 17.7% chance of an increase by March. The probability of a hike by June is growing, at 71.8% today. Stay tuned.
Andâ€¦Why Aren't We Eating Out Anymore?
The NPD Group tells us that the total number of U.S. restaurants have shuttered to such a point that restaurant density, what the industry uses as a measure of units per million population, is at the lowest level in a decade.
Chain restaurant units are up 1%, meaning that there are more fast-food restaurants todayâ€”probably not exactly a huge surprise when you think about whatâ€™s opening in neighborhoods near youâ€”but the number of independent restaurants , those are the Ma and Pa, and local-chef eating places in your neighborhood, are off 4%.
Why is this happening? Because weâ€™re eating at home more often. â€śThis is the most significant drop in total U.S. restaurant counts since the recession,â€ť said Greg Starzynski, director of product management at NPD Foodservice. â€śIf consumers continue to reduce their restaurant visits, we expect the number and density of restaurant units will continue to decline in response to the lower demand.â€ť