It was a choppy day of trading as investors waited on this afternoon's release of the minutes from the Fed's June meeting.
The minutes showed voting members of the Federal Open Market Committee (FOMC) generally agreed that it was time to position for the eventual easing of the central bank's supportive monetary policy, "in response to unexpected economic developments ... or the emergence of risks," such as rising inflation.
"Monetary policy recalibration is now on the table, as the FOMC becomes genuinely more data dependent and less calendar dependent," says Bob Miller, BlackRock's head of Americas Fundamental Fixed Income.
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"The minutes today reflected a Committee that has started to shift its emphasis from realized economic outcomes to a more outlook-dependent reaction function. The upside/downside surprises for relevant economic indicators should now lead financial markets to adjust the distribution of outcomes with respect to tapering asset purchases and eventual lift-off from zero interest rates."
Without a concrete timeline for take-off in today's minutes, though, the major market indexes all pushed higher into the close. The S&P 500 Index gained 0.3% to 4,358 and the Nasdaq Composite rose 0.01% to 14,665 – fresh record highs for both – while the Dow Jones Industrial Average added 0.3% to 34,681.
Other action in the stock market today:
- The small-cap Russell 2000 fell 1% to 2,252.
- While the major indexes have been setting records left and right for months, Apple (AAPL) hasn't managed to hit a new high since January – until today. The mega-cap hasn’t made much in the way of headlines of late, but a steady drumbeat of positive analyst notes has lifted the stock some 14.8% over the past month. Its 1.8% gain Wednesday put it at $144.57, eclipsing its previous closing high of $143.16 set on Jan. 26.
- Newegg (NEGG), an internet electronics retailer that went public in May in a reverse merger, rocketed 148.4% after it announced a new build-to-order PC business. Customers who design their own computers on the Newegg PC Builder can now have them professionally assembled "significantly faster than other competitive BTO offerings," Newegg says. NEGG shares are now up 548% in the past month, and 1,528% for the year to date.
- U.S. crude oil futures dropped 1.6% to settle at $72.20 per barrel.
- Gold futures added 0.4% to finish at $1,802.10 an ounce.
- The CBOE Volatility Index (VIX) fell 1.5% to 16.20.
- Bitcoin prices rose 1.9% to $34,608.50. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m. each trading day.
Tracking That 10-Year Treasury Yield
Another notable move today was in the 10-year Treasury yield, which fell 5 basis points (one basis point is equal to one-one hundredth of a percentage point) to 1.32%.
This is the T-note's lowest yield since February, and puts it close to oversold territory, says Dan Wantrobski, technical strategist at Janney Montgomery Scott.
"Current trends in yields are important to track in this environment," he says. That's because in addition to giving clues about how investors are feeling on a macro basis, "yields have been very influential on stock market internals – where we recently saw reflationary themes lead the broad indices higher as rates rallied (value, small-caps, financials, cyclicals), and low-growth/low-rate themes take on leadership as yields declined (large-caps; tech; discretionary). Going forward, we believe trends in the [10-year Treasury yield] will continue to affect U.S. sector leadership one way or another."
For those who want to play the hot hand of declining interest rates, consider some of these themes that Wantrobski laid out: you can get tech exposure via these sizzling semiconductor stocks, or large-cap exposure via these blue chips that are a favorite among the hedge fund crowd.
But for those that want to position for a bounce in rates, here's a list of small-cap stocks analysts are bullish on. Or, consider these seven master limited partnerships (MLPs) that are benefiting from a rebounding energy market. These MLPs allow you to leverage increased demand for oil, gas and energy products, but with an added bonus: significantly higher yield on average than more traditional energy stocks.
Karee Venema was long AAPL as of this writing.
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