#Fed Keeps Dovish Stance at Today’s Meeting

The market was largely on hold waiting for the Fed’s statement to be released at 2:00pm ET. The statement was little changed, keeping in the “considerable period” phrase that many in the market had believed it would drop. The rest of the statement was little changed, which was much less than many market participants had expected the FOMC would do. However, the Summary of Economic Projections (SEP) showed a different picture. Although the commitee members’ outlooks for GDP and inflation were the same or lower, it raised its forecasts for interest rate projections in 2015, 2016, and 2017 – a curious development. This caused interest rates to rise and influenced a bear flattening in the Treasury yield curve.

Two FOMC members dissented at this meeting: Presidents Fisher and Plosser. Fisher argued that due to the recent increase in economic activity, labor market utilization, and financial market excess, the Fed will need to begin normalizing policy earlier. Plosser dissented for the same reason as the last meeting, believing that the FOMC’s forward guidance was not warranted now that the committee is closer to its economic goals.

Trading was predictably all over the map following the statement and Fed Chair Janet Yellen’s press conference. The biggest standout was the strength in the US dollar, which rallied 0.72% by the end of the equity session, a move in excess of three standard deviations. This caused gold and other commodities to fall. The yellow metal lost more than 1% for the day.

Equities traded around flat for much of the session. After the meeting, stocks briefly rose, the S&P 500 (SPX) gaining as much as 0.58% to breach its prior all-time highs, before settling back to just 0.13% for the session. Energy stocks were predictably weak thanks to the stronger USD and utilities lost in sympathy to higher interest rates. Materials and transportation stocks were strong this morning thanks to a strong earnings report from Fedex (FDX) and one of US Steel’s (X) Canadian units filing for creditor protection. Market breadth was neutral with exactly half of the issues in the SPX advancing.

August consumer prices fell 0.2% from the prior month, lowering the annual rate of change to 1.7% from 2.0% in July. Economists had expected the sequential change to be flat and the year-on-year rate to fall to 1.9%. The core rate was unchanged for the first time since 2010 (economists expected a 0.2% gain) and its year-on-year rate fell to 1.7% from 1.9% in the prior month. The NAHB survey of real-estate agent and realtor sentiment rose to its highest level since 2005.

If you didn’t get enough of the Fed today, not to worry, tomorrow morning at 8:45am Chair Janet Yellen will give a speech to the Corporation for Enterprise Development’s 2014 Assets Learning Conference. The prepared text will be released through a prerecorded video so there will be no Q&A session. Weekly initial jobless claims will be released in the morning in conjuction with August housing starts and permits. Jobless claims are expected to remain near the 300K level from the past six months. Last week’s claims rose to 315K and 304K are expected this week. New housing starts are expected to remain at a similar annual pace of 1.040 million after last month’s figure rose to 1.052 million.

Arguably the second most important event of the week – the Swiss National Bank (SNB) rate decision – is scheduled to be released at 7:30am GMT tomorrow. Because the ECB has chosen to set a deposit rate of -0.20% and the SNB must defend its EURCHF peg of 1.20, this will likely result in a second developed market central bank setting a negative interest rate. Previous comments from SNB policymakers have hinted this is a distinct possibility and the foreign exchange markets have reacted accordingly. This could end up being another headwind for the US dollars as the SNB may be forced to diversify into USD assets rather than Euro.

Another significant event is the Scottish referendum vote, which will determine whether or not it will break from the UK. The first exit polls will be released at 2:00am local Scottish time on Friday and continue until 6:00am.

Oracle (ORCL) is a major earnings report scheduled for tomorrow, the first for the tech sector. ConAgra (CAG), TIBCO Software (TIBX), RiteAid (RAD), and RedHat (RHT) will also report.

#Fed’s rate hikes likely to begin in spring 2015

Quotes from Commerzbank Corporates & Markets: -Janet Yellen’s tendency to make relatively cautious changes to her stance eclipses the fact that looking at her speech from a longer-term perspective, e.g. compared with the remarks she made in spring, one can see that her tone has indeed changed noticeably. For instance, she seems less convinced that the labour market situation is far from normal. But she thinks the improvements have not been sufficient to warrant a clear policy reversal. -After all, she said: “…with the economy getting closer to our objectives, the FOMC’s emphasis is naturally shifting to questions about the degree of remaining slack, how quickly that slack is likely to be taken up, and thereby to the question of under what conditions we should begin dialling back our extraordinary accommodation.”This means it is now only a question of how to time the reversal of interest rates. We still expect rate hikes to beginin spring 2015.

Source: FxWire Pro

Jackson Hole: All Talk, No Market Action

The S&P 500 traded sideways as the the annual central bankers’ conference in Jackson Hole Wyoming kicked off. Federal Reserve Chair Janet Yellen’s speech on the labor market was front and center on traders’ minds. Yellen stayed the course in terms of emphasizing data dependency, saying that the Fed “will be closely monitoring incoming information on the labor market and inflation in determining the appropriate stance of monetary policy”. Yellen discussed the difficulty in determining appropriate policy given current US labor market trends. She acknowledged that the unemployment rate has improved more rapidly than the Fed has anticipated, but also identified ongoing challenges like weak income growth and high levels of underemployment. The Fed may allow inflation to run above the current 2% target to achieve its labor market goals. But there was a hawkish caveat to that revelation, as too much accommodation could later result in an abrupt tightening of monetary policy. European Central Bank President Mario Draghi promoted tax cuts and increased government spending to help jump start Eurozone economic activity, even at the risk of inflation. He also emphasized the ECB’s ongoing readiness to use “unconventional measures” to head off long-term economic damage. Ukraine remained a source of tension. Russia sent a convoy of over 200 trucks, supposedly on a humanitarian mission, into Ukraine, which was deemed an “unauthorized entry” by the Pentagon. NATO officials said that Russia also moved artillery units inside Ukraine and was using them for attacks. Elsewhere, US deputy national security adviser Benjamin Rhodes said direct military action could be taken against ISIS to protect American interests in the Middle East. Despite all the headlines, market activity was fairly muted, with the 10-Year US Treasury yield dropping slightly. The S&P 500 fell just 0.2%, while the NASDAQ finished up 0.1%, aided by Apple (AAPL) rising to hit an all-time intraday high of $101.47. The strong biotech sector also helped keep the NASDAQ above water. Gold saw volatility intraday courtesy of Jackson Hole, but the 0.5% move for the day was far from dramatic. In earnings news, Foot Locker (FL) beat analysts’ second-quarter revenue and earnings expectations. There are no major companies reporting earnings Monday, though momentum traders may be watching Chinese internet company Qihoo 360’s (QIHU) result due before the open. In US economics, the July New Home Sales report will be issued at 10:00 a.m. ET.

Market movers today 22/08/2014

Quotes from Danske Bank: -Focus will be on Janet Yellen’s speech in Jackson Hole at 16:00 CET. Yellen speaks on the subject of the labour market – the key component to the timing of the first rate hike. However, Yellen has spoken extensively on this subject before and it is hard to imagine she can come up with much new given how much time the Fed has spent on analysing this area. -Yellen’s view is clear – that there is still significant slack in the labour market, which is backed up by very moderate wage increases. According to the minutes of the latest Fed meeting, many members expressed that the Fed might soon change the description of the underutilisation of labour. -If Yellen comments on policy at all, she is likely to repeat the phrase from the semi-annual testimony that if the labour market continues to improve faster than expected, the risk is that the first rate hike could come sooner than currently projected. -ECB-president Mario Draghi will speak at 20:30 CET in Jackson Hole after market close in Europe. It is unclear to what degree he will stick to the labour market theme that at the moment is less decisive for monetary policy in the euro area. Fitch is expected to confirm its current triple-A rating of Denmark.

Source: FxWire Pro

Websim Focus sui Mercati Finanziari 22/08/2014 – WS

Chiusura brillante ieri sera per la Borsa americana con l’indice S&P500 salito dello 0,2% a quota 1.992, nuovo massimo storico. Il Dow Jones ha guadagnato lo 0,3%, Nasdaq +0,1%.

I mercati azionari hanno reagito positivamente a una serie di dati che segnalano il rafforzamento della crescita economica in America. Fra i titoli migliori, Intel (INTC.O) +1,8%, Bank of America (BAC.N) +2,5%, JP Morgan (JPM.N) +1,5%, Hewlett Packard (HPQ.N) +5,3%, eBay (EBAY.O) +4,7%.

Stamattina in Asia si registrano diffusi rialzi con l’eccezione della Borsa di Tokio, dove l’indice Nikkei ha chiuso in calo dello 0,2%. Hong Kong avanza dello 0,3%, Shanghai +0,2%, Seul +0,6%, Mumbai +0,5%.

I future sugli indici delle principali Borse europee sono invariati. La giornata di oggi sui mercati è all’insegna dell’attesa del discorso di Janet Yellen. La presidente della Fed parlerà al convegno dei banchieri centrali di Jackson Hole, nel Wyoming, dedicato quest’anno alle dinamiche del mercato del lavoro. I discorsi saranno passati al setaccio alla ricerca di spunti sulle prossime mosse di politica monetaria. In particolare, da Yellen si cercherà di cogliere qualche indicazione sui tempi di un rialzo dei tassi, dopo che ieri una serie di dati relativi all’andamento dei sussidi di disoccupazione, all’attività manifatturiera e al mercato immobiliare hanno rafforzato l’immagine di una consolidamento della ripresa Usa.

Il dollaro ha preso una pausa dopo il rafforzamento delle scorse sedute: stamattina è indicato a 1,329 contro l’ìeuro, da 1,328 della chiusura di ieri sera.
Petrolio ancora in calo; Wti a 93,8 dollari al barile (-0,1%), Brent a 102,5 dollari.

Analisi tecnica borse. Buona reazione di tutti i mercati dopo i dati che segnalano il rafforzamento della crescita in Usa. Nel complesso il quadro di fondo rimane solido e ben impostato.

S&P500 (1.992 +0,2%). Segna il nuovo record storico. Prevediamo nuovi ingressi sulla forza solo su pieno sfondamento di area 2mila, confermato in chiusura di seduta.

Brasile (Bovespa 58.992, +0,1%). Sesto rialzo consecutivo e nuovi top da marzo 2013. Superato lo scoglio di area 58mila, l’indice ha fornito ulteriori segnali di forza che consentono di rientrare in tendenza. Per i dettagli della strategia operativa si rinvia al nostro recente Focus.

FtseMib (20.010 +2%). Il superamento ieri quota 20mila rende il clima più disteso. Ci si allontana dall’importante supporto di medio periodo a 19mila il cui cedimento potrebbe provocare pericolosi avvitamenti.

Variabili macro.

Petrolio. Continuano le vendite spiegate soprattutto dalla forza del dollaro. Il Brent è scambiato a 102,5, poco sopra i minimi dal giugno 2013, il Wti americano a 93,8 dollari. Non vediamo occasioni di acquisto soprattutto di medio periodo.

Oro. Apre a 1.280 dollari l’oncia la sesta seduta negativa. Non vediamo ancora occasioni di acquisto.

Forex. Sfondato l’importante supporto a quota 1,33, il cambio euro/dollaro (1,329) si proietta come previsto verso il successivo obiettivo tra 1,30/1,27. Confermiamo il suggerimento di acquistare dollari in ottica di diversificazione, possibilmente sfruttando i rari rimbalzi.

Bond. Stamattina si riparte con il rendimento del Btp decennale al 2,59% e spread a quota 160.

http://www.websim.it

BORSE ASIA-PACIFICO – Indici in ripresa dopo record Wall Street 22/08/2014 – RSF

INDICE ORE 8,30 VAR % CHIUS. 2013
MSCI ASIA-PAC. <.MIAPJ0000PUS> 513,14 +0,55 468,16
TOKYO 15.539,19 -0,30 16.291,31
HONG KONG 25.085,19 +0,3622.656,92
SINGAPORE 3.331,80 +0,23 3.167,43
TAIWAN 9.380,10 +1,37 8.611,51
SEUL 2.056,70 +0,61 2.011,34
SHANGHAI COMP 2.236,40+0,28 2.115,978
SYDNEY 5.647,40 +0,15 5.352,214
MUMBAI 26.461,91 +0,39 21.170,68
22 agosto (Reuters) – Le borse dell’area Asia-Pacifico sono in generale rialzo, vicino ai massimida sei anni e mezzo, dopo che i positivi dati dell’economia Usa hanno spinto Wall Street ad un nuovo record.

Gli investitori però contengono gli entusiasmi in attesa che il governatore della Fed, Janet Yellen, dia qualche indicazione sul timingdell’aumento dei tassi di interesse Usa, nel suo discorso oggi a Jackson Hole.

Intorno alle 8,30 italiane l’indice Msci dell’area Asia-Pacifico <.MIAPJ0000PUS>, che non comprende Tokyo, sale dello 0,55%.

HONG KONG è in leggero rialzo sullascia della chiusura di Wall Street che ha beneficiato dei dati Usa. In controtendenza Li & Fung, che perde oltre il 4%, ai minimi da sei settimane, dopo che il gruppo specializzato nella produzione tessile e di giocattoli ha postato un utile operativo del primo semestre più debole delle attese. Prada perde l’1,02%.

SHANGHAI si avvia a concludere la sesta settimana consecutiva in territorio positivo, la più lunga serie dal marzo 2012. In evidenza energetici e bancari.PetroChina prende lo 0,25% dopo essere scivolata ieri dello 0,9%. Spicca People.cn, +4,9%, che sulla settimana guadagna il 36%. L”operatore Internet del quotidiano ufficiale del governo cinese ha detto ieri che si appresta acomprare il 35% di una società di software a Shanghai per 182,7 milioni di yuan (29,66 milioni di dollari).

TAIWAN ha chiuso positiva con il sottoindice degli elettronici a +1,16%. L’istituto di statistica dell’isola ha detto oggi che iltasso di disoccupazione è sceso al 3,95% a luglio dal 3,97% del mese precedente – il livello più basso dal giugno 2008 quando era scoppiata la crisi della finanza globale.

SYDNEY ha terminato la settimana con una seduta in marginale rialzo. Labuona performance di Santos, +0,57%, ha trascinato il settore energetico, anche se i guadagni sono stati mitigati dalle prese di profitto.

Sul sito http://www.reuters.it le altre notizie Reuters in italiano. Le top news anche su http://www.twitter.com/reuters_italia

Quartz Daily Brief—Yellen speaks, Gap heads to India, Ebola drug dilemma, space rights

Good morning, Quartz readers! What to watch for today The world’s top bankers are holed up in Jackson Hole. All eyes will be on Janet Yellen as she makes her first speech there as Fed chair, especially after Fed minutes out this week revealed a growing debate about stimulus measures. European Central Bank president Mario Draghi will follow with a speech of his own. What’s really in Russia’s truck convoys? Ukraine’s border guards are checking 260 trucks full of what Russia claims is aid to eastern Ukraine. The war is close to a “crunch point” as Ukrainian forces battle pro-Russian separatists pushing into Donetsk and Luhansk. Angela Merkel heads to Ukraine tomorrow; it’s a move that signifies Berlin’s support for Kiev (paywall). A standoff in Islamabad. After opposition leader Imran Khan broke off talks with the government on Thursday it is uncertain whether he will keep rallying protestors in the streets. Some 30,000 troops and police (paywall) have been deployed in Islamabad and Khan, who wants prime minister Nawaz Sharif to resign, is sounding belligerent. Who will Israel target next? Israel’s defense minister said they would “hunt down” more leaders of Hamas, after killing three senior military commanders in Gaza. And though Israel’s destroyed Hamas’s tunnels between Israel and Gaza, it may try to eliminate the ones still operating between Gaza and Egypt. More clues about James Foley’s killer. Police and intelligence officials in the US and UK are poring over social media posts, voice-recognition software, image analysis, and ex-captives’ testimonies to identify the masked man who executed the American photographer. The UK is leading the investigation as the man who killed Foley had a British accent. Meanwhile, fighting rages in Syria between ISIL militants and the army. Canada checks in. June retail figures are expected to have risen by 0.4% over the month. July’s consumer price index is also due—a dip of 0.1% is expected. While you were sleeping Yes, Ebola’s experimental drug works. The two American missionary workers who contracted the virus while working in Africa have apparently been cured. Both were given ZMapp, the controversial, experimental drug that has not yet been fully tested for side effects. With nearly 2,500 cases of Ebola, and up to 30,000 people needing treatment or vaccines, the drug’s success creates a dilemma for officials. Things cooled down in Ferguson. The governor of Missouri began withdrawing the National Guard and a semblance of normalcy returned after 12 days of protests. Attorney-general Eric Holder got personal, talking about his own run-ins with police. A poll found that more black Americans than whites (paywall) think president Obama handled the race-relations crisis well. The gloves came off in Brazil’s election race. Marina Silva, the new Brazilian Socialist Party candidate for president, wasted no time in attacking Dilma Rousseff, the incumbent, on her economic policies. Polls show Silva has a chance of winning the election, which is on October 5. Family Dollar rejected Dollar General. Family Dollar turned down the $8.9 billion takeover bid from competitor Dollar General, for a smaller bid from Dollar Tree. Antitrust regulators would have quashed the larger deal, Family Dollar executives believe. Senior Pentagon officials called ISIL an “imminent threat.” Army general Martin Dempsey and defense secretary Chuck Hagel said that taking on the organization in Syria is key in defeating ISIL. All options are being considered, including the possibility of airstrikes in Syria, and ISIL could take years to defeat. Argentina got burned. A US judge said that Argentina’s hopeful proposal to pay its foreign debt locally in order to bypass a US bank was illegal. Three weeks ago Argentina defaulted on some of its bonds, its second default in 13 years (paywall). The judge rejected requests to find Argentina in contempt of court. Gap looks at India. The San Francisco-based retailer said it would open stores in India next year, and eventually establish 40 there. Gap also reported flat sales, thanks in part to a 5% decrease in sales to $1.47 billion (paywall) at its Gap Global brand. Quartz obsession interlude Bobby Ghosh explains where to find the moderate Muslim majority: on the internet. “More recently, social media have served as a platform from which Muslims can reject the nihilistic worldview of Islamist fundamentalists and terrorist groups. The rise of the death cult known as ISIL has been greeted with a chorus of condemnation, growing louder with the group’s recent atrocities in Iraq.” Read more here. Matters of debate Sanctions against Russia won’t stop it from invading Ukraine. In fact, if this is anything like 1941, sanctions will encourage an invasion (paywall). The Islamic State won nothing by killing James Foley. Such horrific executions in the past have never changed a country’s policies or public opinion.   Indonesia’s outgoing leader should hike oil prices. He’d be doing his successor a big favor by cutting fuel subsidies. US legislators want to establish ownership rights in space. Mining asteroids could become a viable, cheaper way to obtain resources in the future. Security officials should order copies of Four Lions. As filmmaker Chris Morris said,  “Terrorism is about ideology, but it’s also about berks.” Surprising discoveries Baghdad was quite a lovely place in the 1950s. See for yourself. There are microbes half a mile under the Antarctic… They can exist without sunlight. …and sea plankton in space. They were blown up from earth by air currents and stuck to the International Space Station. Sunscreen is poisoning the seas. Traces that wash off in the water are toxic to some of the ocean’s tiniest inhabitants. A very peculiar kind of vandalism. Russia has asked Bulgarians to stop spray-painting the statues in Soviet war memorials as Superman and Father Christmas. JD Salinger’s New Hampshire home is for sale. It has four bedrooms and is going for $679,000. Our best wishes for a productive day. Please send any news, comments, JD Salinger’s home, and Baghdad polaroids to hi@qz.com. You can follow us on Twitter here for updates throughout the day. You’re getting the Europe and Africa edition of the Quartz Daily Brief. To change your region, click here. We’d also love it if you shared this email with your friends. They can sign up for free here.

S&P Edges Closer to 2000 Ahead of Jackson Hole

The S&P 500 (SPX) hit a new all-time high of 1994.76 today as positive economic data gave the bulls confidence ahead of Fed Chair Janet Yellen’s speech in Jackson Hole on Friday. Jobless claims came in at 298,000, beating the 315,000 forecast by economists. The August Markit US Manufacturing PMI was 58.0, above the 55.7 consensus and an improvement from last month. Existing home sales were 5.15 million in July, slightly exceeding the 5.02 million consensus, though June’s figure saw a slight downward revision. The August Philly Fed Index hit 28.0, well above the 19.7 consensus. And finally, the Leading Economic Indicators Index rose 0.9% in July, above the 0.6% expected. Overseas, the data was mixed. China’s August HSBC Manufacturing PMI disappointed, as did the Eurozone’s manufacturing and service PMI’s. Retail stocks were in focus today, with a number of names in the sector reporting earnings. Sears Holding (SHLD) took a 7.2% hit, finishing at $33.38 after delivering a substantial second-quarter loss. Children’s Place (PLCE) fared much better, rallying 7.8% after beating analysts’ revenue and earnings forecasts. Deep discounter Dollar Tree (DLTR) missed on earnings and the stock fell 1.3% to $54.28. Elsewhere in the space, Family Dollar Stores (FDO) rejected a $78.50 per share offer from Dollar General (DG) based on antitrust concerns. Family Dollar’s board of directors expressed support for a merger with Dollar Tree (DLTR). Retail as a whole underperformed on the day, with the SPDR S&P Retail (XRT) falling 0.2%. The iShares NASDAQ Biotechnology Index ETF (IBB) fell 0.9%. However, it rose nearly 9% in a straight line from August 7, so some cooling off was in order. Tech stocks had a solid day overall, led by bullish action in eBay (EBAY) and Hewlett-Packard (HPQ), which were up on deal speculation and earnings, respectively. Bank stocks were notably strong. The KBW Bank Index (BKX) rose 1.5%. Bank of America (BAC) led the way up with a 4.1% gain. Traders will be intensely focused on Fed Chair Janet Yellen’s speech tomorrow at Jackson Hole. The consensus thinking is that Yellen will still lean towards the dovish side, which could partially explain the recent hard bounce in US equity markets. The domestic economic calendar is empty, but we will see Canadian CPI and Retail Sales data for July. The only big names reporting earnings are Foot Locker (FL) and Royal Bank of Canada (RY).

Deal Activity Keeps US Stocks in the Green

US stocks were higher early today helped by strength from Apple (AAPL) overnight. The tech giant announced an enterprise deal with IBM (IBM) that had its stock up more than 3% in early trading. Gains were moderated to 0.75% during the session, but the benchmark indices were able to recover and finish right around where they started. Poor earnings from Bank of America (BAC), the only major bank this quarter to miss earnings and trade negative, kept in check a further advance in the broad indices. China’s second quarter GDP, released overnight, also gave global risk assets a positive tone to start the day.

Fed Chair Janet Yellen gave testimony to the House Financial Services Committee earlier today and her comments were very similar to yesterday’s. She did face a tougher line of questioning from the committee members in the House, but no new information on monetary policy was revealed.

Industrial production rose 0.2% month-on-month in June, a bit slower than the 0.3% expected, and the prior month’s growth was revised down by 0.1%. However, economists are optimistic that the orders pipeline will lead to stronger growth in the second half of the year. The NAHB survey of real-estate builders and agents showed a second straight month of broad-based increases, rising to 53 in July from 49 last month. This should lead to further outperformance by homebuilder stocks.

A few events in Portugal helped propel European bank stocks higher. Yesterday Rioforte Investments, a holding company within the Portuguese holding group Espirito Santo Financial Group (ESF), filed for bankruptcy protection after missing a repayment to Portugal Telecom on commercial paper. Portugal’s central bank governor said that existing shareholders of Banco Espirito Santo (BES) would be willing to invest additional capital to avert a restructuring event. Other European banks that had been on shaky ground until now  have outperformed over the past two days as investors have become less concerned about weakness spreading to banks with direct or indirect ownership of the Espirito Santo group.

Tomorrow morning, June new housing starts and building permits will be reported. New permit activity usually predates the former category by a few months. Starts are expected to increase to an annualized rate of 1.025 million from 1.001 million in the month prior while permits are expected to rise to 1.042 million from 991K. Weekly jobless claims will also be released.

The only major global economic report scheduled for tomorrow is the final estimate of June eurozone consumer prices. No change is expected.

Most of the last financial companies will report earnings tomorrow. These include Capital One Financial (COF), Keycorp (KEY), Fifth Third Bancorp (FITB), Blackstone (BX), and Morgan Stanley (MS). Also scheduled to report are UnitedHealth (UNH), Baker Hughes (BHI), Philip Morris (PM), IBM (IBM), Schlumberger (SLB), and Google (GOOG).

Janet Yellen Gives Her Irrational Exuberance Speech

Janet Yellen’s semi-annual Humphrey Hawkins testimony to the Senate Banking Committee was the main event for today’s trading session. Fed Chair Yellen noted that there was still a considerable amount of slack in the labor market which warranted a high degree of accommodation now and in the future. However, the market keyed in on her comments about how improved economic activity would trigger a faster pace of rate hikes, with the inverse being true as well. This kept shorter-duration Treasuries under pressure.

In the Fed’s Monetary Policy Report, staff noted that the equity valuations of small-cap firms, as well as those of social media and biotech firms, appear to be stretched, based on price-to-forward earnings relative to historical norms. Of course, in this author’s opinion, it’s hard to determine what a fair valuation of a social media stock is considering the sector is less than two years old. Additionally, reach for yield behavior was noted in leveraged loans and lower-rated, speculative-grade bonds. Lastly, according to our estimation, it was the first time since 2000 that the Fed’s Monetary Policy Report commented on a specific sector of the stock market. Fourteen years ago, the report noted excessive valuations in the tech category.

Small cap stocks were notably weak after Yellen’s comments, as were social media and biotech stocks. The Russell 2000 (RUT) underperformed the S&P 500 (SPX) by 0.78% on a beta-adjusted basis. Gold and oil prices remained under pressure for a second straight day with West-Texas intermediate crude falling below $100. JPMorgan (NYSE:JPM) and Goldman Sachs (NYSE:GS) both beat earnings in the pre-market. Intel’s (NASDAQ:INTC) report after the close matched what it pre-reported a few weeks ago. The company continued to show strong growth with EPS at $0.55 versus $0.52 estimates. Revenues were also ahead at $13.8 billion versus the $13.71 billion expected. Guidance for the coming quarter and year were both raised.

Retail sales rose 0.2% month-on-month in June, worse than the 0.6% that was expected. The prior month’s sales were revised up to 0.5% from 0.3%. The topline sales figure miss was due to a surprising 0.3% decline in the dollar level of auto sales in June. Reported earlier this month, June unit auto sales from manufacturers to dealers were at 16.92 million SAAR, the highest level in nine years. Because the final sales level recognized a drop, auto manufacturers began “channel stuffing” by either forcing more auto inventory to dealers than they needed, or by forcing dealers to make a significant cut to prices. The single month of the regional NY manufacturing survey was the third highest on record, although the index of forward expectations posted a very large drop.

Tomorrow morning the level of producer prices for June will be released. Economists are expecting a 1.8% gain against the same month a year ago in the recently-revamped index. However, economists have been increasingly frustrated by wild fluctuations in the new index due to obscure levels of services prices, indicating the dataset may be completely worthless. Also scheduled for release is June industrial production, a July survey of real-estate broker and builder sentiment, and the Fed’s Beige Book of economic conditions in its 12 districts. At 10:00 a.m. EDT, Fed Chair Janet Yellen will stand before the House Committee of Financial Services to give a testimony similar to the one she gave today.
A catalyst for risk assets is scheduled to be released overnight: China will report on its second-quarter GDP. Economists expect the growth level to remain unchanged at 7.4% year-on-year, the same growth rate seen in the first quarter and close to the government’s official target of 7.5%. The UK’s 3-month average unemployment rate for May and the Bank of Canada’s monetary policy decision are also scheduled.

More financial earnings are scheduled for tomorrow. Notable reports include US Bancorp (NYSE:USB), Blackrock (NYSE:BLK), Bank of America (NYSE:BAC), PNC Financial (NYSE:PNC), and Charles Schwab (NYSE:SCHW). Also on deck are Sandisk (NASDAQ:SNDK), eBay (NASDAQ:EBAY), Abbott Labs (NYSE:ABT), Las Vegas Sands (NYSE:LVS), and Yum Brands (NYSE:YUM).