STTG Market Recap: Month Ends With Volatile Markets

Stocks finished off a big month with a very volatile session as indexes ran around like a chicken with its head cut off all day. You can see from the intraday chart below the S&P 500 started off with a small gap up, rallied til mid morning, then returned to where it began by 1 PM. Markets rallied again into the Fed announcement at 2 PM, then did their normal swirl of confusion for a while before the bigger rally of the day... before giving it all back in the closing hour.

There was nothing particularly new in the Fed statement, but a lot of moving pieces in the currency, bond, and equity markets caused confusion. At day's end the S&P 500 fell 0.01% and the NASDAQ gained 0.27%. For the month the S&P 500 gained 4.9% and NASDAQ 6.5% but almost all these gains came in the first third of the month as stocks rose off late June lows. Earlier in the day the first pass of 2nd quarter GDP was released as well as the ADP employment report which many see as a precursor to Friday's government data on employment.

Economic growth in the U.S. unexpectedly accelerated in the second quarter, with the GDP growing at a 1.7 percent annual rate, according to the Commerce Department. However the first quarter GDP was revised down to 1.1 percent. Private employers added 200,000 jobs in July, topping economists' expectations in an encouraging sign for the labor market recovery.

This action in the last hour caused a lot of havoc on the daily charts - at 3 PM both the S&P 500 and NASDAQ looked to have finally broken out of their recent patterns, but an hour later both had failed.


Bond yields on the 10 year Treasury, which had likewise rallied to near 2.7% pre Fed sold off hard as the statement was viewed as somewhat more dovish.


There was some wicked action in individual equities as well. Visa (V) (and to a lesser degree MasterCard) suffered extreme volatility as news of a judgement on debit card fees:

A federal judge said the Federal Reserve had violated Congress' wishes when it set a 21 cent per transaction limit on debit card fees. WHAT'S NEW: The Fed imposed a transaction limit that was significantly higher than Congress had intended, U.S. District Judge Richard Leon ruled. Leon's decision is being touted as a victory for retailers, who have to pay the transaction fees when their customers use debit cards. Conversely, Visa, MasterCard, and banks receive portions of the fees that the retailers pay.


Herbalife (HLF) - which has been at the center of a feud between 2 famous hedge fund managers saw a big swing up as a third famous manager - George Soros - entered the fray:

The hedge fund battle over Herbalife intensified on Wednesday, with George Soros taking a large long position in the nutritional supplements maker, according to sources. Soros' position in Herbalife is now one of his top three holdings, these sources added. This puts Soros in the same camp as billionaire investor Carl Icahn, who is also long the stock. Bill Ackman of Pershing Square Capital, meanwhile, is short the stock, telling CNBC earlier on Wednesday that he has not covered a single share of his $1 billion bet against the company.

There was little rhyme or reason today, a lot of sectors were moving quite randomly. Tomorrow is the widely watched ISM Manufacturing data and Friday the employment report. The bulls inability to break out of this range for weeks on end has become a bit troubling; we shall see if one of those two catalysts provide a reason for them to succeed of if the bears can wrest some control of the market back.