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Equity markets led by technology staged a strong post-election advance.  Gridlock is the new positive buzz word and yesterday’s era will last into perpetuity following October’s speedbump.

Typically strong advances like the one experienced yesterday, the percentage of advancing S & P 500 stocks is over 90%.  Yesterday it was less than 75%.  The NASDAQ Composite had only 62% of stocks in the index higher according to Bloomberg. Accordingly the percentage of volume for advancing stocks on the NYSE was 71%.  In other over sold bounces the percentage was over 85%.

Today is the conclusion of the two day Fed meeting.  No change in policy is expected but it is the tone of the post meeting statement is of significance.  The markets have not discounted a 0.25% increase at the December meeting, the probability of such rose following October’s jobs data.

If the post meeting is more hawkish than expected, the odds increase that yesterday’s advance was nothing other than an algorithmic/technology fueled advance.

Speaking of potential hawkishness, yesterday’s 30 year Treasury auction was weaker than expected as the bid/cover ratio was the lowest since 2009. The benchmark closed unchanged.

What will happen today?

Last night the foreign markets were mixed.  London was up 0.36%, Paris down 0.07% and Frankfurt down 0.22%.  China was down 0.22%, Japan up 1.82% and Hang Sang up 0.31%.

The Dow should open moderately lower ahead of the Fed meeting.   The 10-year is up 6/32 to yield 3.22%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.