The Box Score
- Fed statement greeted with enthusiasm as commodities rip higher
- Equities celebrate interest rate “dovishness”
- Housing starts jump
- Gold surges $34 in late trade
| Key Market Measures (Wednesday’s Close) | |||
| Dow Jones | 17,325 | +0.4% | |
| S&P 500 | 2027 | +0.5% | |
| NASDAQ | 4,764 | +0.8% | |
| Crude | 39 | +2% | |
| Gold | 1,232 | +0.1 | |
Winners and Weaklings
Strongest: Gold, oil, bonds Weakest: Nothing of note.
March Madness! Fed Spikes U.S. Equities, Gold Shines
Usually reserved for the Division I college basketball tournament, March Madness hit U.S. equity markets Wednesday as well. Quiet, range-bound trade prevailed during the morning half of the session, as market participants approached the impending Fed announcement with cautious optimism. Then the Fed decision came down - widely anticipated by pundits to be a non-event - and the fireworks began.
Gold and oil quickly spiked in the wake of the Fed statement, mainly because key interest rates remained unchanged and the Open Market Committee downgraded its forecast for the number of rate increases to two in 2016 from an earlier projection of four. Simultaneously, the Euro hit new highs against a weakening dollar.
The move in gold was particularly notable, after the yellow ore had closed its early trading session at the $1229 level. By the time U.S. equity markets closed for the day, gold was sitting right at the key $1263 pivot. It’s a good illustration of why precious metals stocks are so difficult to trade: It was literally only moments before the Fed statement when it looked like the gold rally had completely lost its luster.
Jurassic Rig Count
A Baker Hughes report released last Friday, showing that oil and natural gas rigs in the U.S. have plunged to their lowest level on record going back to 1949, continued to grab the market’s attention this week. Widely attributed to excess supply, the diminishing oil and natural gas rig count has fallen to 480, down a whopping 57% from a year ago - and at the lowest levels in 70 years! The previous low was established near the turn of the century, in 1999. Notably, the price of crude has staged a 33% recovery from its $26 dollar trough early this year and is poised to challenge the $40 per barrel mark, perhaps as early as tomorrow.
Company Thoughts and Commentary:
Market sentiment is gearing back toward bullish, but it remains a stock pickers’ market, as a former high-flyer like Twitter (TWTR: $16.70 +3%) is having trouble gaining traction, while Tesla (TSLA: $222, +1.6%) continues to be the bane of professional short-sellers.
Tesla Announces More Details About Top Secret Model 3
Tesla keeps proving its large legion of naysayers wrong, at least in terms of the trajectory of its stock, as the issue tacked on 1.6% during yesterday’s trading session. As always, the news flow regarding the stock was steady, but none more significant than emerging details about the Model 3 unveiling, set for March 31st.
According to published reports fewer than 800 total people will be in attendance for the end-of-month presentation, with 650 spots allocated at random through a lottery for current Tesla owners who submitted their email before noon PT on Wednesday. Invitations will go out today to those selected. Members of the press will be allowed to take “a quick spin” in the vehicle, with orders for the cars opening up on that day.
Current short interest stands at about 29% of the float. We doubt it will be a profitable few weeks for the TSLA bet-against crowd. And you know that a large short position is a very positive sign.
Barrick Gold Gets Market Love
It wasn’t surprising to see shares of Barrick Gold (ABX, $15.20 +7%) - widely considered one of the best barometers of the trajectory of gold stocks and prices - tack on 7% during Wednesday’s gold-plated performance by precious metals. Earlier this week, however, when gold equities appeared ready to capitulate to the downside, Barrick Gold managed to rally as well. The catalyst was a brokerage house upgrade on Tuesday, which raised its view from Hold to Buy, with an $18 price target. Their timing turned out to be impeccable—at least for one day.
Good investing,
Todd Shaver, Editor in Chief