MON-WED’S ACTION: Crimea, Shcrimea, Stocks Rally
Stocks rallied on Monday after Crimea officially voted to leave Ukraine. Stocks rallied not because there was a deescalation but because -so far- there has yet to be an escalation that would threaten the global economy. Crimeans voted overwhelmingly in favor (95.5% of votes cast) to join Mother Russia. The election was a foregone conclusion and the outcome of the election was not accepted as valid by Obama or the EU leaders. The drama continued but the fact that the much anticipated event passed without derailing the global economy helped investors breath a sigh of relief. Economic data in the US was mixed. The Empire Manufacturing Index for March was 5.6, beating estimates for 5.4). The NAHB Housing Market index, which measures builder confidence, fell to 47 in March, missing estimates for 50. Remember, readings above 50 signal expansion.
Stocks edged higher on Tuesday after Putin accepted the referendum. Separately, housing starts slid by 0.2% in February to 907,000 from an upwardly revised 909,000 (from 880,000) in January. A separate report showed consumer prices edged up 0.1% in February after rising by 0.2% in January.
Stocks fell on Wednesday after Janet Yellen accidentally showed the Fed’s hand in her first press conference as Chairwomen. As expected, the Fed said that they will taper QE by another $10B bringing the total down to $55B/month ($25 billion in agency mortgage-backed securities and $30 billion in longer-term Treasuries). Additionally, the FOMC decided to drop the 6.5% unemployment target from its forward guidance. instead the Fed decided to shift the focus to a ‘wide range of information’ on jobs as well as inflation. The big sell off occurred when Yellen answered a question as to what the Fed means by “considerable time” for keeping the current target range for the federal funds rate after the asset purchase program ends. Yellen said “probably six months.” She inadvertently pushed the time table ahead by 6 months. Traders were expecting the rate hike to occur in July and now are looking for April.
THURS & FRI’S ACTION: Stocks Perched Below Record Highs
MARKET OUTLOOK: STRONG UPTREND
The market took a small breather and was back up to new highs. It was encouraging to see the bulls quickly regain control as we head into month and quarter end. At this point, more damaging evidence is needed before the bull market breaths its last breathe. As always, keep your losses small and never argue with the tape.