The Bank of Japan (BOJ) did the unexpected by not adding stimulus today! Their thoughts are to see what has been done already and how the economy may react. The Japanese Yen rallied thus pressuring the US Dollar and the Indexes. The Topix Index decreased about 3 % after the Bank of Japan decision. The Nikkei 225 was down 3.6 % after the BOJ’s decision. BOJ Governor Kuroda is bound to do “whatever it takes” to increase inflation. The next meeting now has higher expectations of stimulus measures as the core inflation decreased to -0.3 % in March thus signaling deflation. Now analysts will focus on the next BOJ meeting set for June 16th. This type of action is a boost to volatility in the marketplace. While the BOJ kept interest rates unchanged, they did vote to keep their current asset purchases and to add a lending program for banks in the Kyushu region which suffered devastation from earthquakes. The UK will have their own agenda to deal with as they have an election on June 23rd to vote on whether to exit the European Union or not.
The US GDP was bolstered by consumer spending which makes up about 70 % of the economic gauge. Consumer spending or personal consumption) increased to a 1.9 % rate. This is the broadest measurement of the health of the economy. Trade relations were dismal as exports decreased 2.6 % in the first quarter and imports increased 0.2 % increasing the trade deficit thus diminishing GDP. The FOMC Meeting Announcement left the Federal Funds Rate at 0.25 to 0.50 % unchanged for April. The economy appears to have slowed and household spending has moderated according to the policy meeting members. Exports and business is regarded as soft along with inflation currently. The hawkish overtone may have come from the labor and housing which may be improving. There was no reference to June for a potential hike. The next FOMC is June 14 – 15th where inflation may still remain under the 2 % target set by the Fed. The data may continue to remain soft thus delaying a hike. The labor strength and wage growth should stimulate consumer spending, but the economic slowdown may have caused concerns among consumers regarding spending. For now, the Fed has kept “accommodative” in their language. Analysts believe that the Fed’s monetary policy supported about 93 % of the move up in the markets. The VIX CBOE Volatility Index was up 10.53 % to 15.22 today. Some investors may use the VIX as a tool to hedge the indexes or a stock portfolio. The VIX is the Chicago Board of Options Exchange Volatility Index which usually trades inversely to the stock indices. As of last week, out of the One-Hundred, Thirty-Two S&P 500 Corporations reporting earnings for Q1:2016, 101 exceeded while 19 missed and 12 met expectations.
Real GDP for Q1a:2016 was 0.5 % while the previous reading was 1.4 %. The GDP Price Index was 0.7 % while the previous reading was 0.9 %. The Initial Jobless Claims for the week of April 23rd was up 9,000 to 257,000 while the previous reading was 247,000. Continuing Claims decreased 5,000 to 2.130 million with a one-week lag time. The Bloomberg Consumer Comfort Index for the week of April 24th was 43.4 while the previous reading was 42.9. The Kansas City Fed Manufacturing Index for April was -4 while the previous reading was -6. The MBA Mortgage Applications for the week of April 22nd Composite Index was -4.1 % while the previous reading was 1.3 %. The Purchase Index was -2.0 % while the previous reading was -1.0 %. The Refinance Index was -5.0 % while the previous reading was 3.0 %. International Trade in Goods Balance was -$56.9 billion while the previous reading was -$62.9 billion. Exports % change were -1.7 % while the previous reading was 2.0 %. The Imports % change was -4.4 % while the previous reading was 1.6 %. Pending Home Sales for March were 1.4 % to a level of 110.5 while the previous reading was 3.5 % to 109.1. The FOMC Meeting Announcement left the Federal Funds Rate at 0.25 to 0.50 % unchanged for April. The economy appears to have slowed and household spending has moderated according to the policy meeting members. Exports and business is regarded as soft along with inflation currently. The hawkish overtone may have come from the labor and housing which may be improving. There was no reference to June for a potential hike. Durable Goods New Orders for March were 0.8 % while the previous reading was -2.8 %. Durable Goods excluding transportation were -0.2 % while the previous reading was -1.0 %. Core Capital Goods were 0.0 % while the previous reading was -1.8 %. The weaker US Dollar and lower energy prices did little to boost this segment of the economy. The S&P Case-Shiller HPI 20-city SA for February was 0.7 % while the previous reading was 0.8 %. The 20-city NSA was 0.2 % while the previous reading was 0.0 %. Redbook Store Sales for the week of April 23rd was 0.8 % while the previous reading was 0.5 %. The PMI Services Flash for April was 52.1 while the previous reading was 51.0. Consumer Confidence was 94.2 while the previous reading was 96.2. The Richmond Fed Manufacturing Index for April was 14 while the previous reading was 22. The State Street Investor Confidence Index for April was 109.1 while the previous reading was 114.6. New Home Sales for March were 511,000 annualized rate while the previous reading was 512,000 annualized rate. The slower sales may be attributed to low inventory levels in the marketplace. The Dallas Fed Manufacturing Survey Production Index for February was 5.8 while the previous reading was 3.3. The General Activity Index was -13.9 while the previous reading was -13.6. The last Nonfarm Payrolls for February came in 215,000 new jobs created while the previous reading was 242,000. The Unemployment Rate was 5.0 % while the previous reading was 4.9 % also. The Private Payrolls was 195,000 while the previous reading was 230,000. The Average Hourly Earnings was 0.3 % while the previous reading was -0.1 %. The Average Workweek was 34.4 hours while the previous reading was 34.4 hours. The Participation Rate was 63.0 % while the previous reading was 62.9 %.
• Friday, we look forward to the Personal Income for March forecast at 0.3 % while the previous reading was 0.2 %. Consumer Spending is forecast at 0.2 % while the previous reading was 0.1 %. The PCE Price Index is forecast at 0.1 % while the previous reading was -0.1 %. The Core PCE Price Index is forecast at 0.1 % while the previous reading was 0.1 %. The Employment Cost Index for Q1:16 is forecast at 0.6 % while the previous reading was 0.6 %. The Chicago PMI for April is forecast at 53.4 while the previous reading was 53.6. Any number over 50 points to expansion. Consumer Sentiment for April is forecast 90.4 while the previous reading was 89.7.
Friday, what to expect? We maintain a now bearish bias unless the (June) E-Mini S&P 500 penetrates $2105.25. Friday, we anticipate an inside to lower! Today’s range was $2094.25 – $2065.25 The market closed at $2072.50. Our comfort zone or point of control for this market (June) appears to be $2083.00. Our potential range for Friday’s trading could be $2094.50 – $2056.50.
E-Mini S&P 500 Chart
(Provided by QST 4/28/2016 6:17 PM)
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