The NASDAQ fell about 0.50%% as Apple and Twitter vastly disappointed. The S & P and Dow posted nominal advance, the result of rising crude and an uneventful Fed meeting. If I wrote three months ago the typical stock would be up following a profit shortfall of several of the market leaders, most would think such remarks as outlandish at best.
Many times I had opined a simple premise for any advance is more buyers than sellers. If everyone owns a sector/company and selling commences, who is left to buy? Conversely if no one owns a company/sector any type of buying will lift values.
Several months ago I referenced a JP Morgan report stating approximately 82% of the volume of a typical stock is result of index funds, stating there is no real positioning of shares outside of index/ETF funds. The big get bigger and the small get smaller. The report further stated this is a major reason why the vast majority of portfolio managers have vastly underperformed for at least the last five years
Are the averages on the verge of a tectonic change where the indices mark time at best while the typical company vastly outperforms? In other words, is yesterday a harbinger of things to come?
Speaking of yesterday, the Federal Reserve left open the door to raising interest rates in June by tacitly nodding to improvement in the global financial markets and downplaying recent weakness in the US economy. In my view the statement was close to expectations…any rate rises will be slow and gradual as the economy gradually improves.
Today first quarter GDP is released. Consensus is expecting a 0.7% growth rate and consumption growth of 1.7%. How will the markets respond to the data? Did the Committee infer growth will be anemic but the forward looking indicators suggesting momentum? Perhaps.
Last night the foreign markets were down. London was down 1.06%, Paris down 1.43% and Frankfurt down 1.25%. China was down 0.27%, Japan down 3.61% and Hang Sang up 0.12%.
The Dow should open moderately lower as the Bank of Japan unexpectedly refrained from adding stimulus measures. To write the obvious, the markets still respond to inferences of monetary policy, the high power elixir that has assisted in boosting equity and fixed income prices. The 10-year is up 4/32 to yield 1,84%.