ECB First Out Of The Gate To Raise Rates
It's cloudy this morning looking out over the Hollywood hills, but I'll take that over Japan where another 7.4 earthquake just hit. My heart goes out to those folks, although it has been reported that this one was out at sea (250 miles from Tokyo) and no damage has been cited in the mainland. Newsflow is relatively light this morning. The big news event came from the ECB in Europe, where the central bank raised its target interest rate for the first time since mid-2008, to 1.25%. The Bank of England held their rates steady. I think the ECB is being premature with this rate hike, but they want to show markets they are serious about inflation. Retail sales for March came out this morning, and were mostly better than expected. With rising gas prices, few investors are bullish on consumers and retailers, but many of the stocks continue to climb the wall of worry. BBBY also reported earnings, which were better than expected, and the stock has gapped to a new high. The dollar is flattish today, and so are most commodities. Oil prices are flat near $108.90, while gold prices are up a bit around $1464. Asian markets were up slightly overnight; the 10-year yield is down at 3.53%; and the VIX is up 2% to 17.26. Trading comment: Still working off the overbought condition. Many market leaders slumped yesterday, and are mixed this morning. Next week earnings season starts, and I think investors will take their next cue from earnings reports. I expect another good quarter overall, but those stocks that disappoint or give tepid guidance will likely get hit. If the market pulls back a little bit as we head into earnings season, it is probably a better setup than if we continued to rally into earnings.