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Market Recap 3/18/15

March 18, 2015

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It was a big day for markets.  The FOMC released their statement regarding monetary policy and the market immediately reacted.  Stocks surged, commodities surged, volatility dropped and the US Dollar dropped precipitously.  Monetary policy has been the center of market conversation and focus for years.  And today was further confirmation that it remains there.

In the statement, the Fed confirms that economic growth has moderated, labor market conditions have improved, household spending is on the rise (due mostly to a drop in energy prices) and inflation is declining.  The economic conditions that are driving federal reserve decision making seem muddled and complicated.  But it still points to one key factor – they are willing to continue to prop the market up either through flowery language or a lack of action regarding an eventual interest rate increase.  This Fed is very dovish in that regard, and Chair Janet Yellen is the perfect figure-head for those dovish policies.

The Federal Reserves mandate is to foster maximum employment and maintain price stability in the markets.  They have committed Trillions of dollars in money creation to deliver on this mandate.  Today, they reaffirmed their view that 0 to 1/4 percent target range for the federal funds rate remains appropriate.  They communicated to the market that they will re-assess these conditions over time and are willing to keep federal funds rates below normal market levels.  But, the biggest part of the statement was the fact that the FOMC dropped the word “patient,” in their official language.

The market reacted.  The dow gained 227 points, Nasdaq 45 points and SP 500 25 points.  Stock price technicals rallied from a low point and finished near highs for the day and pressing towards the swing high on the daily and weekly charts.   Crude Oil popped from 44.50 to 47.00 quickly.   Metals had a huge day with a big advance from Gold and Silver.  Gold finished up 20.70 per ounce and finished near 1172.0 per ounce.  The advance was relief for the metals market after a month that has mostly been in the red.  But, the story of the day was in the US Dollar which took a sharp turn to the downside and dropped several points.  In after hours trading it is still selling off and showing weakness.

These moves were the short-term reaction from markets.  What will be interesting is to watch the next move from markets.  Will this spark a trend in stock prices?  Is the dollar going to sell-off?  It’s far too early to tell.  Keep an eye on the key inter-market charts so that you can stay informed, confident and making good decisions.

The news to pay attention to on Thursday morning will be the Philly Fed Manufacturing INdex due out at 9 am EST.  The Swiss National Bank will have a Monetary policy assessment overnight and the EU Economic Summit is happening for the next 2 days.  International prices on Currencies, Commodities and Equities should be volatile.

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5 Replies to “Market Recap 3/18/15”

  1. Avatar Sheila Purim says:

    Tim, could you clarify why did volatility drop after the announcement? I probably don’t get yet the real meaning of volatility. In my mind it would go up with all securities making big moves right after the announcement. Thanks!

  2. Avatar David Ciporkin says:

    Thanks Tim!

  3. @sgregorio The volatility drop I was referring to was based on Implied Volatility. Actual volatility rose….because prices went crazy. Implied Volatility dropped.

  4. Avatar Denna Dean says:

    Thanks Tim!

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