Markets wiggled inter day looking for clues as to what the Federal Reserve has in mind for interest rate increases for the foreseeable future. Continued weakness in wages and job growth are keeping the Fed from acting now, and whether the first hike comes in September, December, or sometime in 2016, Janet Yellin has committed to a gradual process. By days end, the S&P 500 settled in the very middle of its recent range, and right on top of the 50 day moving average above the 2100 mark, followed by a positive open on Thursday after inflation data fell in line with expectations and jobless claims came in much lower than expected. Advanced options traders have ways to cash flow exactly this situation. To learn more about this, click here: http://www.optionsuniversity.com
Just like the markets, the CBOE Volatility Index (VIX) is also range bound dropping off of recent highs near 16 to settle in around 14.50. It has been nearly a year since this “fear index” has been below 11, and has not been above 18 since February.
OVERSEAS: Markets in Europe were broadly, but mildly, down as the situation with Greece remains the focus. Asian markets were also broadly down, but hit hard particularly in Shenzhen and Shanghai with both markets dropping over 3%. The Japanese Nikkei was also rocked as it closed below the 20K level. Political reforms being considered in China aiming for universal suffrage are likely the cause of the pullback in Asia.
OIL: Oil inventories are continuing to creep downward, though at a slower rate this week. Crude stockpiles dropped by 2.7 Million barrels compared to a 6.7 Million barrel reduction the previous week. The price of oil is hovering near $60.
JOBS: New jobless claims dropped by 12K compared to last week to a much lower than expected 265K (versus an expectation of 275K). This reverses a recent uptick in joblessness as the overall reduction in the number of people who are recently unemployed continues downward overall.
HOUSING: Though coming in slightly lower than expected, housing starts remain strong at over one million new starts in May. This on top of a revision upward of the April numbers to 1.165 Million. Permits, being the leading indicator, came in very strong at 1.275 Million suggesting continued robust future construction.
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