Main U.S. indexes rise slightly ahead of Fed 2 PM EDT
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Tech leads S&P 500 sector gainers; real estate weakest
sector
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Euro STOXX 600 index up ~0.4%
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Dollar ~flat; gold up slightly, crude dips; bitcoin gains
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U.S. 10-Year Treasury yield ~flat at ~3.61%
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BUYING THE DIP: BORROWING COSTS FALL, MORTGAGE APPLICATIONS
RISE (1030 EDT/1430 GMT)
Bank jitters prompted a flight to safety last week, dragging
Treasury yields down and mortgage rates with it.
And so, even amid tightening credit and tougher lending
standards, demand for home loans notched its third consecutive
weekly gain last week, rising by 3% as the cost of borrowing
eased, according to the Mortgage Bankers Association (MBA).
The average 30-year fixed contract rate slid 23
basis points to 6.48%.
That sent applications for loans to purchase homes
up 2.2% while refi demand jumped 4.9%.
Noting that mortgage rates touched their lowest level in a
month, MBA’s Deputy Chief Economist Joel Kan writes “both
purchase and refinance applications increased for the third week
in a row as borrowers took the opportunity to act, even though
overall application volume remains at relatively low levels.”
He’s not wrong. Despite edging up in recent weeks, overall
mortgage demand remains 51.6% below year-ago levels:
On the heels of Tuesday’s blowout existing home sales print,
along with increases in housing starts/building permits and an
uptick in homebuilder sentiment, recent data suggests that the
sector is returning to some semblance of equanimity after the
boom-and-bust COVID era.
Here’s a handy dashboard, which also tosses in Case-Shiller
home price growth and housing stock performance for good
measure.
It’s worth noting that the Philadelphia SE Housing index
, rebased to the nadir of the COVID crash, has still
handily outperformed the broader S&P 500 over the same
time period:
Wall Street is showing little conviction in the opening hour
of trading as market participants wait for the Fed to emerge
from its conclave at 14:00 EDT, bearing tidings of what is
widely expected to be a 25 basis point hike to the Fed funds
target rate.
The accompanying statement, revisions to economic forecasts
and the all-important dot plot, not to mention Chair Powell’s
Q&A session to follow, are all likely to provoke their customary
market gyrations.
(Stephen Culp)
*****
SITTING TIGHT (1001 EDT/1401 GMT)
Major U.S. averages are holding close to the unchanged
mark in the early stages of trading on Wednesday, after notching
their first back-to-back winning sessions since March 2-3, as
investors gird for the Fed policy announcement and subsequent
press conference from Chair Jerome Powell.
Expectations for a 25 basis point hike from the central
bank stand at about 85%, with a roughly 15% chance of no hike,
according to CME’s
Fedwatch Tool. The market had been steadily climbing toward
anticipating a 50 basis point hike before concerns about
regional banks as well as the broader banking sector dampened
expectations for a more aggressive Fed, with expectations
rapidly changing with the ebb and flow of bank concerns.
The 11 S&P sectors are skewed mostly negative, with only
three in positive territory, led by technology, while
real estate is the primarily laggard with a decline of
more than 1.5%.
The S&P 500 is also sitting just below its 50-day
moving average just shy of 4,015, a resistance level it has not
climbed above since March 9.
Below is your market snapshot:
(Chuck Mikolajczak)
*****
SWISS FRANC KEEPS SAFE-HAVEN STATUS (0932 EDT/1332 GMT)
The turmoil in the Swiss banking sector, which culminated in
a regulator-orchestrated Credit Suisse takeover deal by UBS this
weekend, has raised some speculation the Swiss franc would lose
its safe-haven status.
Analysts at Barclays said this is very unlikely.
“CHF ‘safe haven’ de-classification requires radical shifts
in Switzerland’s balance sheet via ‘safe asset’ outflows. This
is unlikely in the near term and doubtful in the long term.”
They added that an expected 50 basis point rate hike by the
Swiss National Bank on Thursday and further FX interventions
should allow recent resilience to extend.
The Swiss franc is up around 2% this month against
the dollar.
(Joice Alves)
*****
EUROPEAN PROPERTY: EQUITY RAISES COMING? (0926 EDT/1326 GMT)
As markets look to have found some footing after banking
stress caused wild gyrations this month, pressure on European
real estate stocks shows no sign of abating with tightening
financial conditions looking set to weigh further.
The STOXX Europe 600 real estate index is down more
3.3% to its lowest level in five months, while battered banks
are extending their bounce, helping the broader STOXX
600 equity benchmark edge slightly higher.
So what is the outlook for European property? Morgan Stanley
is downbeat and flags rising risks that executives at real
estate companies in continental Europe may have to tap
shareholders to beef up their finances.
“We think risks are rising that companies will have to issue
equity,” write MS analysts led by Bart Gysens.
“The continental universe is dominated by stocks for which
yields screen too low, rents could be vulnerable, or a
combination, and more often than not financed with too much
debt, evidenced by myriad balance sheet repair initiatives,”
they say
“EPS generation is under attack from an inevitable rise in
debt costs, while upward pressure on asset yields drives
deleveraging, which erodes EPS further,” they add.
Eleven of the top twelve STOXX losers are real estate
stocks. Germany’s Aroundtown is the biggest decliner,
last down 9.2%.
(Danilo Masoni)
*****
S&P 500 INDEX: TRADERS LOOK TO BE FED SOME CLARITY (0900
EST/1300 GMT)
Going into the conclusion of the a much anticipated FOMC
meeting with the release of the latest policy statement at 2:00
PM EDT Wednesday, followed by Fed-Chair Powell’s press
conference at 2:30 PM EDT, e-mini S&P 500 futures are
edging red.
Meanwhile, traders are keenly focused on S&P 500 index
chart levels:
The SPX ended Tuesday higher for a second-straight session,
closing at 4,002.87. That said, with an intraday high of
4,009.08, the benchmark index stalled just a little more than 3
points from its rising 50-day moving average (DMA), which ended
at 4,012.61.
The 50-DMA should ascend to just shy of 4,015 on Wednesday,
which will roughly coincide with the March 9 high at 4,017.81.
The short-term trendline from the February 2 high, which
should be around 4,047, and the March 6 high, which was at
4,078.49.
Additional resistance is at the line from the January 2022
record high, which is now around 4,120. The February 2 high was
at 4,195.44 and the 23.6% Fibonacci retracement of the March
2020-Janaury 2022 advance is at 4,198.70.
On the downside, Tuesday’s opening gap requires a fall to
3,956.62 for a fill, and the 200-DMA should be around 3,934. The
38.2% Fibonacci retracement of the March 2020-January 2022
advance is at 3,815.20. The May 2022 and March 2023 troughs were
at 3,810.32 and 3,808.86.
It now remains to be seen if the results of Wednesday’s Fed
events provide enough impetus to ultimately resolve the S&P
500’s multi-month trading range essentially defined by the 23.6%
and 38.2% Fibonacci retracements of the March 2020-January 2022
advance.
(Terence Gabriel)
*****
FOR WEDNESDAY’S LIVE MARKETS POSTS PRIOR TO 0900 EDT/1300
GMT – CLICK HERE
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)
