No-Taper Decision Directs Global Stock Market Activity

Thursday’s global stock market activity demonstrated a reaction to the decision by the Federal Reserve’s FOMC against the September taper.

Wednesday’s unexpected decision by the FOMC to delay its plan to taper back the Federal Reserve’s bond purchases was the key factor impacting Thursday’s global stock market activity.

In the United States, investors took profits from Wednesday’s rally and watched stock prices decline, despite three upbeat economic reports.

Initial unemployment claims for the week ending September 14 rose less than expected, to 309,000 – despite economists’ expectations for 341,000 new claims.

The Philadelphia Federal Reserve’s September 2013 Business Outlook Survey indicated that its headline diffusion index of economic activity soared to 22.3 from August’s 9.3. Economists were expecting a reading of 10.0 for September.

The National Association of Realtors reported that existing home sales rose 1.7 percent in August, to a seasonally-adjusted annual rate (SAAR) of 5.48 million. Economists had been expecting a SAAR of 5.25 million.

The Dow Jones Industrial Average (NYSEARCA:DIA) lost 40 points to finish Thursday’s trading session at 15,636 for a 0.26 percent decline. The S&P 500 (NYSEARCA:SPY) dipped 0.18 percent to close at 1,722.

The Nasdaq 100 (NASDAQ:QQQ) advanced 0.20 percent to finish at 3,237. The Russell 2000 (NYSEARCA:IWM) declined 0.16 percent to end the day at 1,075.

In other major markets, oil (NYSEARCA:USO) fell 1.55 percent to close at $38.08.

On London’s ICE Futures Europe Exchange, November futures for Brent crude oil dipped 6 cents (0.06 percent) to $108.70/bbl. (NYSEARCA:BNO).

December gold futures fell $5.50 (0.40 percent) to $1,363.80 per ounce (NYSEARCA:GLD).

Transports had a smooth ride on Thursday, with the Dow Jones Transportation Average (NYSEARCA:IYT) advancing 0.28 percent.

In Japan, stocks soared on the news that the FOMC voted against the “Septaper”. Commodities sector stocks led the rally. The Nikkei 225 Stock Average skyrocketed 1.80 percent advance to 14,766 (NYSEARCA:EWJ).

In China, the Shanghai Stock Exchange is closed on Thursday and Friday for the Mid-Autumn Festival (NYSEARCA:FXI). The decision by the FOMC sent shares soaring in Hong Kong on Thursday. Hong Kong’s Hang Seng Index jumped 1.67 percent to end the session at 23,502 – its highest closing level since February (NYSEARCA:EWH). The Hong Kong Stock Exchange will be closed on Friday.

In Europe, the post-FOMC meeting rally was more restrained than what was witnessed in Asia. The financial sector led the advance and gold miners surged with the rising price of gold.

The Euro STOXX 50 Index finished Wednesday’s session with a 0.94 percent advance to 2,936 – its highest closing level since May 11, 2011. The STOXX 50 rose further above its 50-day moving average of 2,790. Its Relative Strength Index is 71.43. Since most investors consider an RSI above 70 an “overbought’ signal, we could see a pullback (NYSEARCA:FEZ).

Technical indicators revealed that the S&P 500 remained above its ever-increasing, 50-day moving average of 1,678 despite finishing Thursday’s session with a slight, 0.18 percent decline to 1,722. Its Relative Strength Index retreated from 72.13 to 70.18. Because most investors consider an RSI above 70 in the “overbought” range, we could see another pullback. The MACD continues to rise above the zero line and the signal line has crossed above the zero line, suggesting the likelihood of a further advance.

For Thursday, most sectors finished in negative territory except for the technology and industrial sectors, which advanced by 0.08 percent and 0.34 percent, respectively.

Consumer Discretionary (NYSEARCA:XLY): -0.03%

Technology: (NYSEARCA:XLK): +0.08%

Industrials (NYSEARCA:XLI): +0.34%

Materials: (NYSEARCA:XLB): -0.36%

Energy (NYSEARCA:XLE): -0.25%

Financials: (NYSEARCA:XLF): -0.39%

Utilities (NYSEARCA:XLU): -0.47%

Health Care: (NYSEARCA:XLV): -0.33%

Consumer Staples (NYSEARCA:XLP): -0.46%

Bottom line: Three upbeat economic reports failed to offset the stock market decline caused by profit-taking after Wednesday’s rally.

Disclaimer: The content included herein is for educational and informational purposes only, and readers agree to Wall Street Sector Selector's Disclaimer, Terms of Use, and Privacy Policy before accessing or using this or any other publication by Wall Street Sector Selector or Ridgeline Media Group, LLC.