Fundamentals

U.S. Equities Generally Lower on Discount Rate Speculation, Jobs Data

U.S. Session Key Developments

•    Speculation Picks Up Regarding Fed Discount Rate Hike
•    Jobless Claims Higher Than Expected In Last Reading, Leading Indicators Rise
•    Crude Oil Trades Lower as U.S. Dollar Gains Against Most Counterparts

U.S. stocks traded generally lower today on speculation that the Federal Reserve may raise the discount rate before the next FOMC meeting and a worse-than-expected labor report.  The Dow Jones Industrial Average and Nasdaq Composite actually managed to post gains for the session, but the broader-based S&P 500 fell a fraction of a point to 1,165, its first down-day of the week.  Initially, the S&P index traded higher as the Conference Board announced that the index of leading indicators rose 0.1 percent in February, the eleventh consecutive gain for the index.  This was an especially strong sign as the growth came without a pickup in inflation, as shown by unchanged consumer prices for February according to the Labor Department.  The reception was somewhat muted, however, due to a labor report that showed initial jobless claims of 457,000 for the week ended March 13, worse then the expected reading of 455,000.  Stocks fluctuated throughout the rest of the day before closing slightly lower, as speculation spread that the Federal Reserve might raise its discount rate before the next FOMC meeting.  Speculation has abound because there was hardly a decline in borrowings since the most recent discount-rate increase on February 18.  The Fed Board of Governors met to discuss the discount rate on March 15 and held a “general discussion of discount window matters” with the FOMC.

DJIA 30                     10,779.17                      +45.50                       +0.42%
The Dow Jones Industrial Average extended its eight-day winning streak to nine, posting the best performance among major U.S. indices.  Each index component traded higher, with the exception of consumer goods, and 21 of the 30 Dow stocks finished the day in the black.  Boeing posted the strongest performance on the day, adding 2.1 percent after Continental Airlines announced that it expected to receive the first six Boeing 787s in 2011.  DuPont and 3M Co. also posted strong gains, adding at least 1.5 percent each, to help push the Dow to its highest close since October 1, 2008.

S&P 500                       1,165.83                           -0.38                       -0.03%
The broad-based S&P 500 traded slightly to the downside, as commodity prices fell and financial shares dropped nearly 0.5 percent.  Oil & gas stocks were the worst performing sector, dropping 1.1 percent as crude oil prices fell towards the $82 a barrel level.  Southwestern Energy shares dropped 5.3 percent, while Baker Hughes fell 4.8 percent on the day.  As for financials, Bank of America was down over 1 percent and Wells Fargo shed 0.8 percent, one day after Senator Chris Dodd proposed his financial regulatory plan.  The plan, in its current form, contains elements of the “Volcker Rule” which analysts believe could hurt bank profits.

NASDAQ                     2,391.28                         +2.19                     +0.09%
Shares on the tech-heavy Nasdaq gained for a third consecutive day as technology stocks gained 0.1 percent.  Qualcomm posted the largest gain among the fifteen most-heavily weighted tech stocks on the Nasdaq, adding over 3 percent on the session.  Qualcomm India said yesterday that it has filed an application with the Indian government to bid in the country’s auction for broadband wireless access.  The worst performer among heavily-weighted technology shares was Baidu, as shares of the Chinese search engine giant fell 0.4 percent.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com