Daily Market Update – February 24, 2015 (8:15 AM)
Yesterday was a very quiet day in the market as it traded in a very narrow range. Today looks as if it won’t start much differently, but there could be some surprises along the way, as Janet Yellen begins her 2 days of mandated congressional testimony.
Based on the way the markets have reacted lately to anything coming from the Federal Reserve, there may not be too much of a response, at least not in the stock markets.
The real action may be in the bond markets and then maybe secondarily flowing over to stocks.
Even if you’re a day trader the actual dynamic isn’t very important, it’s just that the stock market hasn’t had any kind of theme for a while and has been trading aimlessly while bond markets are focused on what seems to be the certainty of rate increases, questioning only whether they are coming soon or very soon.
While Greece and oil prices are basically the only external stories of interest outside of any surprises that may be delivered over the next two days of testimony, the basic internal stories are recurring ones. Those are earnings reports and this week marks the end of the final important period of earnings as the major national retailers speak up.
This morning Home Depot gave reasons to be optimistic, not just for their own business but for the consumer’s ability and willingness to spend and for the health of all of those smaller contractors whose spending activity at Home Depot reflects on overall optimism. As far as the economy goes, there are worse problems to have than companies reporting having to battle with currency headwinds.
This morning also came Macys, which just a couple of weeks ago gave some positive forward guidance, but now reported a miss on top line revenue. We’ll just have to see how that gets spun and whether or not the recent extremes in weather in the Hortheast corridor change their sunny predictions from just a couple of weeks ago. Later this week come Target, Kohls, JC Penney and Sears. They will have something to say about consumer optimism and willingness, too and won’t be spending too much time on those pesky headwinds.
Otherwise, over the next couple of weeks are some stragglers reporting their earnings with an occasionally important company doing so in the company of much lesser ones, until it starts all over again in about 7 weeks.
With 3 new purchases yesterday I don’t know how interested I’ll be in adding any more, although there is still enough cash reserves to do so. I would feel better about dipping into those reserves if I had a greater sense of confidence that positions set to expire this week are likely to be assigned, although some are in decent enough position for that to be the case and the others appear to be positioned for rollovers, but those can all change even on the basis of a simple unintentional comment during congressional testimony.
The more likely would be those assignments the more likely I would be inclined to spend the money in anticipation. However, if rollovers appear to be more likely then there isn’t too much reason to deplete cash if existing positions can be used to generate next week’s income stream.
The problem that I’d rather not face, but it does occur, is when there is dwindling cash and decreased likelihood of assignments and rollovers, so there’s some hope that there won’t be any unfortunate slips of the tongue by Yellen over the next two days.
Other than her very first press conference that hasn’t been an issue and for the most part when she speaks markets react positively. However, when you speak for hours on end, unless there’s something of a blockbuster in those comments the reactions are mixed and often appear as if they’re just biding time until some blockbuster might come along.
I may be biding my time today, as well, hoping that she gives the markets something to be happy about.