Stocks In Holding Pattern, Investors Await FOMC Decision

Investors held their breath on Tuesday in anticipation of Wednesday’s decision from the Federal Reserve’s Federal Open Market Committee as to whether to initiate the taper of its bond-buying. Stocks held close to Monday’s closing prices and the Chicago Board Options Exchange Volatility Index (VIX) – also known as the “fear index”, was absolutely unchanged from Monday’s final reading of 13.39.

The S&P Case-Shiller Home Price Index showed a 12.2 percent increase on a year-over-year basis in May. The result was a tad short of economists’ expectations of a 12.3 percent year-over-year increase.

The Conference Board’s Consumer Confidence Index for July decreased slightly more than expected to 80.3 from June’s 82.1 (which was revised upward from 81.4). Economists were expecting to see a decline to 81.3 in July.

The Dow Jones Industrial Average (DIA) lost a point to finish Tuesday’s trading session at 15,520 for a 0.01 percent decline. The S&P 500 (SPY) advanced 0.04 percent to 1,685.

The Nasdaq 100 (QQQ) climbed 0.53 percent to finish at 3,085. The Russell 2000 (IWM) rose 0.27 percent to close at 1,043.

In other major markets, oil (USO) sank 1.24 percent to close at $36.67.

On London’s ICE Futures Europe Exchange, September futures for Brent crude oil declined by 64 cents (0.60 percent) to $106.81/bbl. (BNO).

August Gold Futures declined by $2.80 (0.21 percent) to $1,325.60 per ounce (GLD).

Transports were rolling again on Tuesday, with the Dow Jones Transportation Average (IYT) advancing 0.27 percent.

In Japan, stocks surged as the yen finally weakened to 98.46 per dollar during Tuesday’s trading session in Tokyo. A weaker yen causes Japanese exports to be more competitively priced in foreign markets (FXY). Earnings reports helped fuel the rally as more than 60 percent of the companies listed on the Topix index, which have reported quarterly earnings so far, have beaten expectations. The Nikkei 225 Stock Average jumped 1.53 percent to 13,869 (EWJ).

In China, stocks made solid gains after the People’s Bank of China injected funds into money markets by way of a 17-billion-yuan issuance of seven-day reverse bond repurchase agreements. The Shanghai Composite Index climbed 0.70 percent to close at 1,990 (FXI). Hong Kong’s Hang Seng Index advanced 0.48 percent to finish the session at 21,953 (EWH).

European stocks continued to make gains on Tuesday, as a result of old-fashioned earnings reports, rather than the magic performed by the European Central Bank (VGK). Alcatel-Lucent was the big winner, as the French telecom giant saw its share price jump 14.4 percent. Other big gainers were electricity group EDF and Britain’s ITV.

The Euro STOXX 50 Index finished Tuesday’s session with a 0.64 percent advance to 2,759 – climbing further above its 50-day moving average of 2,689. Its Relative Strength Index is 62.67 (FEZ).

Technical indicators reveal that the S&P 500 remained above its 50-day moving average of 1,645 after finishing Tuesday’s session with a modest, 0.04 percent advance to 1,685.96. At this point, bears are hoping to see the formation of a head-and-shoulders pattern on the S&P chart. Its Relative Strength Index rose 61.48 to 61.72. The MACD has just crossed below the signal line to suggest a likely decline.

For Tuesday, four sectors were in positive territory and five sectors were in the red. The technology sector led the group, with a 0.51 percent advance.

Consumer Discretionary (XLY): -0.25%

Technology: (XLK): +0.51%

Industrials (XLI): +0.42%

Materials: (XLB): -0.25%

Energy (XLE): -0.19%

Financials: (XLF): -0.05%

Utilities (XLU): +0.33%

Health Care: (XLV): +0.02%

Consumer Staples (XLP): -0.10%

Bottom line: Stocks remained in a holding pattern on Tuesday and the major stock indices were relatively unchanged from Monday’s closing levels, as investors awaited Wednesday afternoon’s announcement from the FOMC as to whether the taper will begin in September.

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