Financials are up as the Fed talks rate hikes and Republicans teases tax reform

Stock market indexes today are seeing a positive correction after recent downturns, and financials in particular are leading gains. Fed Chairwoman Janet Yellen has indicated that the central bank should not wait to raise rates until inflation reaches 2%, and there is a danger in waiting too long. Her comments have been received as more hawkish, with some degree of caution. Banks tend to benefit from higher interest rates as it increases their net interest margins. There have been recent reports that a tentative tax code plan from the Republican Party is aiming to greatly reduce tax rates on businesses and some individuals, as well as streamlining tax codes in general. Although this news supports market participants’ expectations for a pro-business agenda, the feasibility of easily passing the bill is in question. Health-care reform has so far been unsuccessful in Washington and this can be looked at as a template for the tax-reform bill.

At the time of publication, the DJIA is up 0.10%, or 22.13 points, at 22,307. The S&P 500 is trading at 2,503- up 0.26% from the open. The Nasdaq-100 is up 1.00% at 6,444.

Using the ^GSPC symbol to analyze the S&P 500, our 10-day prediction window shows  overall negative signals. Today’s negative vector figure of -0.11% reverses to positive signals for two trading sessions before returning negative for the remainder of the forecast.  Today’s predicted support and resistance is 2,490.27 (± 3.12) and 2,504.42 (± 3.13), respectively. The predicted close today is 2,494.03. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.  

Highlight of a Recent Winning Trade

On September 25, our ActiveTrader service generated a Bearish recommendation for Newell Brands Inc. (NWL).

Trade Breakdown

Within the first hour of trading, NWL passed through the Entry 1 price of $41.36 (± 0.21) reached its Target of $40.98 by mid-day of the trading session. The Stop Loss was set at $41.80.

Must-buy Stock for Thursday

Our must-buy stock for Thursday is KeyCorp (KEY), a regional banking group based in  Cleveland, Ohio. The stock is showing building positive signals in our Stock Forecast Toolbox’s 10-day forecast. Our 10-day prediction model shows positive vector signals building from +0.38% to above +1.3% within three trading sessions.

The stock is trading at $18.54 at the time of publication, up 1.09% from the open with a +0.38% vector figure.

Thursday’s prediction shows an open price of $18.59, a low of $18.19 and a high of $18.83.

The predicted close for Thursday is $18.35. Vector figures show +0.92% for Thursday, which continues to incrementally build throughout the forecast.  

Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Note: The Vector figures calculate the change of the Forecasted Average Price relative to “today’s” actual price. The figure shows expected average price movement “Up or Down”, in percent. Trend traders should trade along predicted direction of the Vector. The higher the value of the Vector the higher its momentum.

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Oil

Crude oil prices have fluctuated in Wednesday’s trading, following unexpected reports from the U.S. Energy Information Administration for domestic inventory levels. Crude supplies, which were expected to continue rising, showed a decrease of 1.8 million barrels. Countering this data, the EIA report shows an increase in exports last week, as well as a rise in refining activity.  A strengthening U.S. dollar, due to recent Fed commentary around interest rate hikes, has also pressured crude oil prices as they are denominated in that currency.  West Texas Intermediate for November delivery is priced at $52.11 per barrel at the time of publication, up 0.48% from the open.  

Looking at USO, a crude oil tracker, our 10-day prediction model shows mixed signals. The fund is trading at $10.54 at the time of publication, which is up 0.43% from the open. Today’s prediction sees support at $10.30 (± 0.04) and resistance at $10.49 (± 0.04). The predicted close for today is $10.35. Vector figures show -0.54% today, holding negative for four trading sessions and reversing into positive movement for the remainder of the forecast.  Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.   

Gold

The price for December gold is down 0.99% at $1,298.60 a troy ounce at the time of publication. A rebound in equities, a bolstered U.S. dollar, and news of a tentative tax-reform bill have all contributed to sway investor sentiments toward risk-assets. Gold prices tend to move inversely with the U.S. dollar- the currency in which the metal is denominated. We’re also seeing a better-than-expected report on durable-goods orders for the month of August (up 1.7%).

Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows consistent negative signals. The gold proxy is trading at $122.15, down 0.80% at the time of publication. Today’s predicted low is $122.34 (± 0.27) and the predicted high is $123.52 (± 0.27). The predicted close today is $123.11. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.   

Treasuries

Yields are spiking today as investors sell off government paper on the news from the Federal Reserve around interest rate hikes. Fed Chairwoman Janet Yellen has moved to a slightly more hawkish opinion on rate hikes and indicated that waiting for 2% inflation would not be prudent. The White House has also released more information about a tax-reform plan, as well as an overall tax code transformation.  The yield on the 10-year Treasury note is up 2.86% at 2.30% at the time of publication. Bond prices tend to move inversely to yields.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for bond prices in our Stock Forecast Tool, we see overall negative signals in our 10-day prediction window. Today’s vector of +0.04% reverses into downward movement and remains negative for the duration of the forecast. The ETF is priced at $124.82 at the time of publication- down 1.53% from the open. The predicted close today is $127.13 with a low and high of $125.90 (± 0.22) and $127.27 (± 0.23), respectively.  Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Volatility

The CBOE Volatility Index (VIX) is down 1.08% to 10.06 at the time of publication, and our 10-day prediction window shows overall positive signals. The predicted close today is 9.63 with a negative vector of -0.03%. Today’s predicted lows and highs are 9.60 (± 0.20) and 10.32 (± 0.22), respectively. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

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