Tentative Gains on Contracting Volume

US equity markets overcame headwinds provided by overseas markets and a weak start to register modest gains yesterday. The Nasdaq gained 0.55% while the S&P 500 added 0.50% and the Dow Industrials ticked 0.21% higher. Volume on the NYSE (-12.01%) and Nasdaq (-9.41%) however, contracted again.

Crude oil reversed direction yet again yesterday. After a sharp pullback on Tuesday, crude WTI regained all that ground lost by closing above $38/bbl again – for the second time in three days. As a result, the energy sector regained the top spot on the Sector Heat Map. Away from energy’s 2.20% gain, markets were relatively subdued both in terms of price action and volume.

Increasingly it appears as though investors are holding off on any lopsided exposure ahead of next week’s FOMC Meeting.

Today’s Economic Calendar is unlikely to provide much in the way of hysterics as only Weekly Jobless claims (272k expected) and the Bloomberg Consumer Comfort Index are slated for release.

It is worth noting that the 10-year yield has risen from a year-to-date low of 1.64 on February 11th to 1.89 yesterday. February 11th we saw lows posted by equities, crude and interest rates, all of which have recovered handsomely in the ensuing four weeks. That 15% rise in the 10-year yield mirrored much of the price action we have seen not only in financials as a sector but across many other interest rate sensitive sectors of the market. Next week’s FOMC Announcement holds the key to our near term direction, not only for equities, but for many of the asset classes mentioned above. If, as I suspect, the Fed leaves rates unchanged, while simultaneously delivering commentary that speaks to pending tightening, markets will likely find a reason to hold onto its recent rebound from the February lows.

flickr photo: Lending Memo