Bank of England Leaves Rates Unchanged

From the opening bell until mid-morning markets had resumed their trade lower – initiated on Tuesday. At 10:30 AM EST the S&P 500 made an intraday low of 1875.45 before finding some support which in turn fueled a reversal that ultimately led to a mixed close for US equity markets.

Though we did not see markets test the January 20 lows that I highlighted in yesterday’s note, we got close enough to trigger some buying by those that were fearful of missing a short term bottom.

The S&P 500 closed with a gain of 0.50%. The Dow Industrials gained a more meaningful 1.13% while the NASDAQ failed to close out the session in positive territory, losing 0.28%. Very importantly, volume expanded handsomely on both the NYSE (+16.01%) and NASDAQ (+13.18%). That increased volume in conjunction with a solid reversal in pricing indicates that institutions are increasingly more constructive despite the challenges markets face.

Interesting, Tuesday’s sharp trade lower did not violate the January 20th lows and yesterday’s reversal from a near test of those lows further strengthens the relevance of those levels for investors.

The largest factor influencing equities was once again crude which rallied sharply (+8.3%) on the day.

In turn, the energy sector was the best performing group. Materials ( +3.42%) and Industrials (+2.46%) rounded out the days top three sectors. Health Care (-0.41%) and Consumer Discretionary (-1.30) were the only sectors to close in the red.
Economic data yesterday was dominated, at least in the early going, by yet another solid ADP Report.

Consensus was calling for a gain of 190k, we got 205k instead for the month of January. The PMI Services Index was in line, 53.2 versus consensus of 53.7. ISM Non-Mfg. Index slipped to 53.6 from the prior month’s revised 55.8. Most interestingly, the EIA Report was mixed. Crude inventories slipped to 7.8M from last week’s 8.4M. Gasoline rose to 5.9M from 3.5M. Distillates were -0.8M from last week’s -4.1M. A mixed report that in a perfect world should not have led to a furious rally in crude. It happened anyway, largely as a result of a weaker dollar. As I mentioned earlier, crude rallied more than 8% in the day. Investors are hedging in anticipation of a production agreement that may lead to a drop off production.

Today’s Economic Calendar includes Weekly jobless claims, Productivity and Costs and Factory orders – in that order.

Photo flickr: CjW Esq